Oil prices increased on Tuesday following a fall to near 11-year lows in the previous session, which compelled traders to buy more.

Brent crude increased 40 cents and traded at $38.32 a barrel, while the US crude rose 18 cents and traded at $36.49, Reuters reported.

The dollar fell against a basket of currencies, prompting the purchase of oil contracts that are dollar-denominated.

Oil prices were already under pressure in recent weeks following the decision by the Organisation of the Petroleum Exporting Countries (OPEC) in December not to put tab on export.

"If the Brent level and exchange rate were to be maintained, it is virtually inevitable that diesel, which is only a couple of pence behind, would follow."

The prospect of Iranian oil exports following lifting of sanctions has an impact on investors.

During the last week, the Brent / WTI premium has nearly halved to $1.8 per barrel, as OPEC recorded high production and drillers in the US are continuing to produce large amounts of crude.

An expected increase in interest rates in the US is expected this week.

A strong dollar value will make it expensive for buyers paying in other currencies, leading to a fall in crude prices.

The price of OPEC basket of 12 crudes stood at $32.60 a barrel on Monday, compared with $33.76 the previous Friday.

Schneider Electric energy industry analyst David Hunter said: "The recent dip in oil prices is significant enough to suggest that the market is spooked by Opec’s meeting last week and there could be further reductions to come.

"The fact that Brent crude has fallen into the $36-$38 range, having broken through the $40 point to multi-year lows, means that we are now seeing sub-£1/litre petrol at many forecourts.

"If the Brent level and exchange rate were to be maintained, it is virtually inevitable that diesel, which is only a couple of pence behind, would follow."

However, OPEC secretary general Abdullah al-Badri said that the current low prices will not continue for a long time and will rise in the coming days.