Brent crude oil inched lower on Tuesday as ample global supplies outweighed tensions in the Middle East, while U.S. oil bounced higher after four sessions of losses.
For Brent, higher output from Libya and Iraq overshadowed the start of U.S.-led air strikes against Islamist groups in Syria. U.S. crude rallied after earlier falling close to 17-month lows.
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Global oil prices have fallen steeply since June as geopolitical fears waned and strong supply, including from the United States, swamped markets.
Libyan oil output has risen to 800,000 barrels per day, with the key El Sharara oilfield restarting, a National Oil Corp (NOC) spokesman said on Tuesday, from 700,000 bpd at the weekend.
Iraq's southern oil exports have increased this month to 2.6 million bpd, approaching a record high hit in May.
Brent for November delivery fell 12 cents to settle at $96.85 a barrel after climbing as high as $97.59 a barrel in early trading. It hit a two-year low of $96.21 last week.
Brent is down nearly 6 percent this month, with the oil benchmark on track for a third straight monthly fall.
U.S. crude rose 69 cents to settle at $91.56 a barrel, rebounding from a session low of $90.58, which was its weakest since Sept. 11. Its discount to Brent narrowed to around $5.25 a barrel.
Eyes will now turn to a weekly U.S. oil inventory poll from the U.S. Energy Information Administration on Wednesday at 10:30 a.m. EDT (1430 GMT).
U.S. oil stockpiles were expected to have risen 400,000 barrels last week. Gasoline stocks were seen down 100,000 barrels and distillate stocks up 600,000 barrels.
The American Petroleum Institute on Tuesday said that crude stocks last week fell 6.5 million barrels, distillate stocks rose 3 million barrels and gasoline stocks rose 91,000 barrels.
"Even if we get a bearish inventory report, if hostilities in Syria grow overnight that may trump the stockpile number," said Dan Flynn, analyst at Price Futures Group in Chicago.
Brent had risen earlier in the session as the United States and its Gulf allies started air and missile strikes against Islamic State and other militants.
The U.S. military said the strikes, which were carried out with the support of Jordan, Bahrain, Saudi Arabia, Qatar and the United Arab Emirates, were designed to disrupt the threat of an "imminent attack" against U.S. and Western interests.
Islamic State vowed revenge, singling out Saudi Arabia, the world's largest oil exporter, for supporting the U.S.-led strikes.
The reported shutdown of a gasoline-making unit at Irving Oil's Saint John refinery in Canada, one of the largest refineries supplying New York Harbor, also prompted a jump in refined product prices. RBOB gasoline futures rose more than one percent to $2.619 a gallon.
(Reporting by Edward McAllister in New York, David Sheppard in London and Seng Li Peng in Singapore; Editing by Dale Hudson, Jane Baird, Andrew Hay, Chizu Nomiyama, Cynthia Osterman and Gunna Dickson)
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