OIl report

The oil market report as on Tuesday is ....

A brighter start across European stock markets Tuesday also soothed some of the market fears that had contributed to Monday's sharp sell-off in crude futures, but the focus remained largely trained on the plight of the dollar ahead of the Fed's 1815 GMT rate decision.

"I still think that, despite the volatility yesterday, the money coming in on the back of hedging against the dollar and inflation is going to continue for a while," said Mike Wittner, head of global oil market research at Societe Generale in London. "I think it's too soon to say 'this is it.'"

At 1221 GMT, the front-month May Brent contract on London's ICE futures exchange was up $2.15 at $103.90 a barrel.

The front-month April light, sweet, crude contract on the New York Mercantile Exchange was trading $2.14 higher at $107.82 a barrel.

The ICE's gasoil contract for April delivery was up $18 at $975.50 a metric ton, while Nymex gasoline for April delivery was up 563 points at 256.05 cents a gallon.

The Federal Reserve is expected to trim its benchmark interest rate by as much as 100 basis points Tuesday, analysts said.

"Odds are high that we will get a one percent cut in rates. This should further stabilize the equity markets and help return the commodity markets to a firmer footing," said Edward Meir, analyst at MF Global in New York.

While unlikely, a Fed decision that doesn't meet with market expectations would trigger a steep reduction in crude and commodity prices, some said, given apparent signals that the relationship between a weaker dollar a higher commodity prices remains intact.

"On any 'bullish dollar' surprise from the Fed, the commodity exodus will lack any historical comparison," said Olivier Jakob of Petromatrix in Switzerland.

Analysts suggested that while the crude market appeared to retain its focus on the dollar, after the steep falls at the start of the week a return of market attention to near-term fundamentals couldn't be ruled out, given a gloomy economic outlook for the U.S. and perhaps elsewhere.

"It may be too premature to call last night's sell-off a much needed correction to overheated prices, because it was dictated by risk aversion and the broader market developments," said Andrey Kyruchenkov of Sucden Research in London.

"However, eventually such an erratic sell-off may certainly turn investor attention back to fundamentals and question whether robust energy demand from large emerging markets could substitute for a potentially lower demand in the U.S. and other developed economies in the Northern Hemisphere."

Wednesday's U.S. Department of Energy inventory data is likely to provide a test of how much attention the crude market is paying to near-term oil market fundamentals.

Last week's 6.2 million barrel increase in U.S. crude stockpiles failed to dampen the stimulus of a weakening dollar, and prices hit fresh highs after the inventory data's publication.

"In the last couple of weeks the market has ignored inventory data," said Andy Sommer, analyst at HSH Nordbank in Hamburg. "There has been short-term reaction and then (the crude price) has come back up - I wouldn't say I'd expect the market to change this time because there are too few signs to say the market is really coming back to fundamentals."

According to the average of a Dow Jones Newswires survey of analysts' forecasts, U.S. crude oil stocks rose by 2 million barrels in the week ended March 14. Gasoline inventories grew by 100,000 barrels, according to the survey, while distillate stocks fell 1.4 million barrels. Refinery use is seen to have increased by 0.2 percentage point to 85.2% of capacity.