U.S. government report expected to show a drop in crude oil inventories.
Investors were weighing whether expected production increases from Saudi Arabia, the world's largest oil producer, would do enough to quench rising global demand. The Saudis are planning a meeting of oil producing and consuming nations in Jeddah on Sunday to seek ways to tackle soaring oil prices.
Over the weekend, Saudi Arabia told U.N. Secretary-General Ban Ki-moon that it would increase oil output by 200,000 barrels a day, or by 2 percent, from June to July. In May, the country raised production by 300,000 barrels a day.
"If there is any announcement along those lines, you'd think it would have some positive effect on oil prices," said David Moore, a commodity strategist at the Commonwealth Bank of Australia in Sydney. "But the markets are also going to be wondering whether they see this as a permanent solution to the issue of adequacy of oil supplies to meet ongoing growth in oil demand."
Light, sweet crude for July delivery rose 57 cents to $134.58 a barrel by noon in European electronic trading on the New York Mercantile Exchange. The contract declined 60 cents to settle at $134.01 a barrel on Tuesday.
Tuesday's pullback in oil prices followed broad swings Monday, when prices surged to a record $139.89 per barrel and tumbled as low as $132.84 before closing down modestly.
