* Federal Reserve reaffirms bond-buying policy
* MasterCard says U.S. gasoline demand down, weighs on oil
* Coming up: EIA oil data, 10:30 a.m. EST Wednesday (Recasts, updates with analyst reaction following FOMC, trading volume, API oil data)
By Robert Gibbons
NEW YORK, Dec 14 U.S. crude oil prices slipped on Tuesday after seesawing with the dollar and remaining pressured after the Federal Reserve said economic recovery was still too slow and reaffirmed its commitment to its bond-buying plan to stimulate the economy.
Crude oil prices seesawed as expectations that weekly oil inventory reports would show gasoline stockpiles rose last week and a separate report of weak fuel demand pressured U.S. gasoline futures RBc1.
But with cold weather in the United States and Europe boosting heating fuel demand, U.S. heating oil futures rose and helped limit crude oil's losses.
U.S. crude for January delivery CLc1 fell 33 cents to settle at $88.28 a barrel, having seesawed between $87.74 and $88.95. Prices reached a 26-month high of $90.76 on Dec. 7.
"The Fed's announcement ... had been pretty much priced into the market. The oil market is looking for a reason to move higher, after having fallen from the high above $90 last week," said Addison Armstrong, analyst at Tradition Energy in Stamford, Connecticut.
January crude oil options on the New York Mercantile Exchange expire on Wednesday, ahead of the January futures contract's expiration on Dec. 20.
Total U.S. crude trading volume was at 553,856 lots after post-settlement trading, according to Reuters data. That was below the previous session's 589,228 lots traded and about 17 percent below the 30-day average of 667,478 lots.
ICE Brent crude for January LCOc1 managed a 2 cent gain to settle at $91.21 a barrel, trading from $90.68 and $91.73.
The January Brent contract expires on Thursday.
Brent prices were supported by news that daily crude oil output from nine of the main North Sea streams is expected to fall by more than 5 percent in January. [ID:nLDE6BD22K]
The U.S. dollar rose slightly against the euro and yen and the dollar index .DXY was up after the Federal Reserve announced after its policy meeting that the economic recovery was still too slow to bring down unemployment, and reaffirmed its commitment to purchase $600 billion in bonds to stimulate the economy. [ID:nN14232588]
A stronger dollar can pressure dollar-denominated oil prices by lifting the value of greenbacks paid to producers, attracting investment to foreign exchange from commodities markets and lifting prices to consumers using other currencies.
Strong Chinese implied oil demand for November [ID:nTOE6BC02N] has lifted demand expectations even as investors remain cautious after China did not raise interest rates despite data at the weekend pegging November inflation at a 28-month high.
The positive sentiment in financial markets will not, however, be enough to sustain an oil price above $90 unless supported by strong fundamentals while downside financial risk from the European debt crisis remains, analysts warned.
Adding to concerns about U.S. oil demand, U.S. retail gasoline demand fell 2.7 percent last week as prices rose to their highest level this year, a report from MasterCard Advisors said on Tuesday.
Demand was also 1.3 percent lower than the year-ago period, the report said. [ID:nNLLENE6PQ]
EYEING U.S. OIL INVENTORIES
The industry group American Petroleum Institute's oil inventory report released late on Tuesday showed crude stocks fell 1.4 million barrels in the week to Dec. 10, less than forecast. [API/S]
Gasoline stocks rose 2.4 million barrels and distillate stocks rose 2.0 million barrels, the API report said.
Crude futures prices extended losses slightly in post-settlement trading after the API report.
U.S. crude oil inventories were expected to have declined 2.5 million barrels last week, according to a Reuters expanded survey of analysts released ahead of the API report. [EIA/S]
Gasoline stockpiles were expected to be up 1.7 million barrels. The API report showed gasoline stocks rose 1.2 million barrels in the U.S. Northeast region alone and the supply rise was expected to ease recent supply tightness in the New York Harbor hub, delivery point for the U.S. gasoline contract.
Distillate inventories were forecast to be down 500,000 barrels as investors eye the impact on stockpiles as cold weather in the U.S. Midwest and Northeast and northern Europe boosted heating fuel demand. [ID:nDTN695] [ID:nDTN644] (Additional reporting by Gene Ramos in New York, Una Galani in London and Rebekah Kebede in Perth)