Oil prices resumed their retreat in Asia on Tuesday after enjoying  rare gains overnight, as investors train their sights on the US Federal Reserve's most hotly anticipated policy meeting in years.

After plunging around 12 percent last week crude closed slightly up Monday. But with global demand still weak and a continuing supply glut, the commodity was unable to build up any price momentum in Asia.

Energy firms, which have been hammered for months by the sinking oil price -- down more than 60 percent since June 2014 -- enjoyed early gains but late selling saw most end the day further in the red.

The decision by the OPEC oil exporters' group earlier this month not to cap production levels continues to depress prices. BMI research said in a report that more downside pressure is expected in the coming months.

"Oil prices will remain anchored by oversupply," it said, predicting that the global surplus "will only narrow significantly post-2018".
Woodside Petroleum in Sydney edged down 0.8 percent and Santos shed 1.8 percent, while Inpex in Tokyo was more than one percent off.

However, broad gains in Hong Kong -- after eight straight losses -- helped CNOOC and PetroChina rise more than one percent in the afternoon.

Dealers are turning their attention to Washington, where the Fed later Tuesday begins its two-day policy meeting expected to end with its first interest rate rise for nine years.

While analysts say the increase has been on the cards for several weeks, the real focus is on subsequent steps.

- Dollar struggles -
Investors are focusing on the Fed," Toshihiko Matsuno, chief strategist at SMBC Friend Securities, told Bloomberg News.

"They want to see what the Fed will announce on the target interest rate at the end of 2016. There’s market consensus that rates will rise this week, but it is unclear what happens after that."

The dollar has been subdued in recent sessions, with the euro edging up despite the expected US rate rise and speculation the European Central Bank will go the other way and loosen monetary policy to kickstart the eurozone economy.

"If anything, the trend for the dollar going into the Fed is a little bit on the soft side, as generally speaking it’s all about justifying the current positioning rather than pushing it further," said Sam Tuck, a senior currency strategist at ANZ Bank New Zealand.

The euro edged up above $1.10 and the greenback fell to 120.80 yen -- well off the levels above 123 yen seen last week.

Asian stock markets remained largely shaky despite a positive lead from Wall Street, where all three main indexes ended in positive territory Monday.

Tokyo was the main loser as the stronger yen hit exporters. The Nikkei tumbled 1.7 percent, while Sydney fell 0.4 percent, and Shanghai edged 0.3 percent lower. There were also losses in Manila, Jakarta and Kuala Lumpur.

However, Hong Kong was up 0.4 percent in the afternoon after falling for the previous eight days, Seoul closed up 0.3 percent and Singapore advanced 0.1 percent.

- Key figures around 0710 GMT -

Tokyo - Nikkei 225: DOWN 1.7 percent at 18,565.90 (close)

Hong Kong - Hang Seng: UP 0.4 percent at 21,386.14

Shanghai - composite: DOWN 0.3 percent at 3,510.35 (close)

Euro/dollar: UP to $1.1034 from $1.0992 late Monday

Dollar/yen: DOWN to 120.80 yen from 120.98 yen

New York - Dow: UP 0.6 percent at 17,368.50 (close)

London - FTSE 100: DOWN 1.3 percent at 5,874.06 (close)

]Source: AFP