But investors remained cautious as they awaited the outcome of a US Federal Reserve policy meeting, where the central bank is expected to reduce its massive stimulus programme which has been buoying commodity prices.
Brent crude oil futures for November fell 23 cents to $107.96 per barrel early on Wednesday, after slipping to its lowest in more than a month in the previous session.
US crude oil futures for October gained 16 cents to $105.58, after settling $1.17 per barrel lower in the previous session.
“One of the foremost factors (for Brent prices) has been news that Libya is having some success restoring production capacity which follows the momentum on the likelihood of a diplomatic solution to Syria,” Reuters quoted CMC Markets chief market analyst Ric Spooner as saying.
“US prices trending higher is probably just a short-term fluctuation and also Libya being able to increase production has a more direct impact on Brent than on WTI.”
A combination of strikes, militias and political activists have blocked the majority of Libya’s oilfields and ports since end July.
Libyan oil supplies are expected to rise to 400,000 to 450,000 barrels per day as one of the biggest western oilfields, El Sharara, ramps up after workers resumed pumping on Monday, though oil production in Libya is still far below its pre-war level of 1.6 million bpd.
The geopolitical risk premium built into Brent oil prices was also receding as fears of a US-led military strike on Syria and any consequent Middle East oil supply disruption abated.
Diplomats from five key nations kicked off talks on Tuesday on a Western-drafted United Nations Security Council resolution to eliminate Syria’s chemical weapons.
“The diplomatic resolution to gather and destroy Syria’s arsenal of chemical weapons helped to relieve worries of a US military response which had plagued the market recently,” Reuters cited Phillip Futures analysts saying in a note on Wednesday.
Investors were also selling oil as a two-day Fed meeting began on Tuesday in which the Fed is expected to cut its monthly bond purchases by at least $10 billion.
The US dollar, in which most commodities are priced in, was near a four-week trough against a basket of major currencies .
While the likely outcome of the Fed meeting might already be priced into oil, a bigger tapering could pose a risk to oil prices, prompting some selling, said Spooner.
Supporting US oil prices, crude inventories fell by 252,000 barrels in the week to 13 September, compared with analysts’ expectations for a decrease of 1.4 million barrels in a Reuters poll, data from industry group the American Petroleum Institute showed.
Crude stocks at the Cushing, Oklahoma, delivery hub fell by 889,000 barrels, API said.
Oil inventory data from the US Energy Information Administration is due later on Wednesday.
Information from Upstream was used in this report.