Brent crude oil rose towards $112 a barrel on Wednesday, after falling more than 4 percent in the past two days as concerns eased regarding a possible military strike against Syria.
U.S. President Barack Obama vowed on Tuesday to explore an initiative from Russia to neutralise Syria's chemical weapons, but he voiced scepticism and still sought support for his threat to use force should diplomacy fail.
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Prices could spike if any move against Syria spills over into violence in the Middle East's main oil-producing countries.
Brent was trading 39 cents higher at $111.64 a barrel by 1120 GMT, after dropping to a two-week low of $110.59 and closing down $2.47 on Tuesday. U.S. crude was off 16 cents at $107.23 a barrel.
The prospect of an imminent attack on Syria added a risk premium of about $5 that pushed Brent above $117 last month, but the market has almost returned to levels from before then. Analysts see further downside.
"In view of the abating geopolitical risks, oil prices are likely to fall further, for the oil price level is still too high from a purely fundamental perspective," Commerzbank said.
Many analysts say the U.S. Federal Reserve will decide next week to begin tapering its monetary stimulus, although last Friday's disappointing U.S. jobs data convinced many economists that any withdrawal will probably be gradual.
A cut in Fed stimulus would likely strengthen the dollar, hitting oil and other commodities priced in the greenback.
U.S. crude stocks fell by 2.9 million barrels last week, compared with analyst expectations for a decrease of 1.5 million barrels, American Petroleum Institute data showed on Tuesday.
Gasoline stocks rose by 195,000 barrels, compared with expectations in a Reuters poll of a 1.3-million-barrel decline.
Investors await Wednesday's report from the U.S. Energy Information Administration (EIA) to be released at 1430 GMT.
Obama asked leaders in Congress to put off a vote on his request to authorise the use of military force against Syria. He said U.S. Navy ships in the eastern Mediterranean and other forces in the region were in place and ready to respond should diplomacy fail.
He set no deadlines for diplomacy to run its course but said the United States would work with Russia and China to put forward a resolution at the U.N. Security Council requiring Syrian President Bashar al-Assad to give up his supplies of sarin, mustard gas and VX nerve agents