U.S. crude ended the session lower on Tuesday, having fallen as much as 3 percent, weighed down by weaker stocks on Wall Street and skittish sentiment ahead of the expiry of the spot futures contract.
U.S. crude futures' October contract, which expired as the market's front-month at Tuesday's settlement, settled down 85 cents, or 1.8 percent, at $45.83, a barrel. It had risen more than 4 percent on Monday.
The front-month in Brent, the global oil benchmark, turned positive shortly before U.S. crude's settle. It traded up 13 cents at $49.05 by 2:34 p.m. EDT.
The dollar's rise to a nearly two-week high also weighed on oil, as crude and other dollar-denominated commodities became less affordable to users of the euro and other currencies.
Losses in oil were limited though by a Reuters survey showing U.S. crude inventories had fallen almost a million barrels last week, following through with the previous week's decline of 2.1 million barrels.
Traders and investors will get more oil inventory data after market settlement, from industry group the American Petroleum Institute at 4:30 p.m. EDT (2030 GMT). Official stockpile figures are due Wednesday from the U.S. Energy Information Administration.
Stocks on Wall Street hit a two-week low as investors tried to gauge when the Federal Reserve will raise U.S. interest rates.
"A of people are just nervous because the stock market is just so volatile that it's affecting all markets," said Christian Moreno, senior trading consultant at HighGround Trading Group in Chicago.
"Oil, for instance, could fundamentally go higher from signs of declining U.S. production. But with the stock market fluctuating, people are getting out of their positions early, translating into a risk-off day."
Oil rig reductions suggest a decline of more than 250,000 barrels per day in U.S. crude production between the second and fourth quarters, Goldman Sachs said in a report on Monday.
Oil prices have swung as much as 8 percent in a day in recent weeks on mixed readings of supply-demand. U.S. crude futures sunk to a 6½-year low of $37.75 on Aug. 24, only to hit a near one-month high of $49.33 a week later.
"The three-day price spike seen toward the end of August could easily be negated by an equivalent-sized three-day price plunge next month," said Jim Ritterbusch at oil markets advisory service Ritterbusch & Associates in North Wabash, Chicago.
"But, until then, a continued standoff between the bulls and the bears would appear likely."