Oil prices were hovering above US$74 a barrel Tuesday as investors expected OPEC to try to halt a three-month slide in prices by cutting production quotas at least 1 million barrels a day.
At the same time, gains by the U.S. dollar against the euro were putting the brakes on any gains in oil prices.
"The general trend is still of uncertainty," said analyst Olivier Jakob of Petromatrix in Switzerland.
By midday in Europe, light, sweet crude for November delivery was down 26 cents to US$74.13 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session, it rose as high as US$75.69. The contract gained overnight US$2.40 to settle at US$74.25.
Prices closed as low as US$69.85 a barrel last week, down 53 percent from a record US$147.27 on July 11.
In London, November Brent crude was down 62 cents to US$71.41 a barrel on the ICE Futures exchange.
"It definitely looks like a cut is in the cards," said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore. "A cut of at least 1 million has been priced in. A cut much larger than 1 million could move prices higher."
The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global oil supply, plans to announce an output reduction at a meeting on Oct. 24 at its headquarters in Vienna, said the group's president, Chakib Khelil.
Khelil has said OPEC may cut output again at a meeting in December, and that the group considers the oil market oversupplied by about 2 million barrels a day.
Investors are also keeping a close eye on whether non-OPEC producers, such as Russia, will reduce supply as analysts lower price expectations for next year. Deutsche Bank on Monday cut its 2009 oil price forecast to US$60 a barrel from US$92 and predicted US$57.50 for 2010.
"Producers are getting concerned about this downward spiral in pricing since the summer," Shum said. "Some governments have based their budgets higher than current prices."
Rising global stock markets have also supported prices this week.
Federal Reserve Chairman Ben Bernanke told the House Budget Committee on Monday that a fresh round of government measures might help ease the country's economic weakness. There were also signs of a reviving credit market as bank-to-bank lending rates eased further.
Stock indexes across Asia rose Tuesday, with Japan's benchmark Nikkei 225 stock average up 3.3 percent. The Dow Jones industrials average rose 4.7 percent Monday.
"Lately oil has traded in sync with equities as traders look to equity markets for indications of the macro-economic outlook," Shum said.
On the negative side for oil, the dollar continued to rise against the euro and the British pound, a trend which can draw investors out of commodities.
By midday in Europe, the euro was down to US$1.3240 from US$1.3323 in the previous session, while the British pound bought US$1.7069 compared with US$1.7121 late Monday in New York.
In other Nymex trading, heating oil futures rose 1.01 cents to US$2.22 a gallon, while gasoline prices lost 0.46 cent to US$1.7155 a gallon. Natural gas for November delivery gained 2.4 cents to US$6.765 per 1,000 cubic feet.