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Oil prices rose on Tuesday, extending the previous day's rally on hopes of higher seasonal fuel demand and potential U.S. crude purchases for its petroleum reserve, though gains were capped by a firmer dollar.

Brent crude futures climbed 28 cents, or 0.3%, to $81.91 per barrel by 0038 GMT and U.S. West Texas Intermediate crude futures rose 31 cents, or 0.4%, to $78.05.

Prices climbed about 3% to a one-week high on Monday, buoyed by expectations of rising fuel demand this summer despite the dollar's climb on expectations the U.S. Federal Reserve will leave interest rates higher for longer.

"The oil market was supported by anticipation of rising fuel demand this summer and the prospect that if WTI stays below $79 the U.S. will move to build up its strategic reserves," said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.

"Since WTI is near its 200-day average, we expect oil prices to remain close to current levels for a while," he said.

The U.S. could hasten the rate of replenishing the Strategic Petroleum Reserve as maintenance on the stockpile is completed by the end of the year, Energy Secretary Jennifer Granholm told Reuters last week. It wants to buy back oil at about $79 a barrel.

Goldman Sachs analysts, meanwhile, said they expect Brent to rise to $86 a barrel in the third quarter, noting in a report that solid summer transport demand will push the oil market into a third-quarter deficit of 1.3 million barrels per day (bpd).

Investor attention is on the release of U.S. consumer price index data for May and the conclusion of the Fed's two-day policy meeting on Wednesday for hints on when the Fed may start reducing interest rates.

The market is also watching for reports from the American Petroleum Institute industry group, due later on Tuesday, and the Energy Information Administration, the statistical arm of the U.S. Department of Energy, due on Wednesday.

U.S. crude oil stockpiles were expected to have fallen while product inventories likely rose last week, a preliminary Reuters poll showed on Monday.

Investors are also waiting for monthly oil supply and demand data from the U.S. Energy Information Administration (EIA) and OPEC on Tuesday and the International Energy Agency (IEA) on Wednesday.