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US crude settles up 20 cents, or 0.5%, at $41.85

U.S. WTI crude futures settled up 20 cents, or 0.5 percent, at $41.85 after struggling to find direction on Tuesday.

Weighing on markets were bets that OPEC will not cut output to stem a supply glut when the world's biggest oil producers meet this week, although a rally in U.S. gasoline and a weak dollar limited losses on the petroleum complex.

Trading has been sluggish ahead of the Organization of the Petroleum Exporting Countries' meeting in Vienna on Friday amid worries the group will choose to keep output high to defend market share against non-member oil producers such as the United States and Russia.

U.S. jobs data for November are also due on Friday, and likely to keep oil prices range bound till then, traders said. Stronger jobs numbers could help the Federal Reserve decide on the first U.S. rate hike in nearly a decade, sending the dollar higher and oil possibly into the $35-a-barrel area.

"Markets are realizing the weakness in the fundamentals and the potential for an absolute non-event (OPEC) on Friday, which has more possibility of putting prices down further," said Abhishek Deshpande, strategist for Natixis in London.

Brent crude futures fell 34 cents at $44.27 a barrel by 2:36 p.m. (1936 GMT).

U.S. gasoline futures, also known as RBOB, soared about 6 percent to near three-week highs, reacting to what traders said was higher requirements for refiners to meet U.S. renewable fuel standards.

The Environmental Protection Agency (EPA) on Monday raised its previous targets for the amount of biofuels to be mixed into motor fuel for the three years to 2016.

The Renewable Identification Numbers (RINs) requirements influence U.S. gasoline futures as they ultimately factor in production costs.

"The boost to RINs is working its way into RBOB prices, combining with refinery issues to rally prices strongly," said Matt Smith, director of commodities research at Clipper Data, a New York-headquartered consultancy and database for energy. "Certainly, the RINS spike is causing havoc throughout."

The gasoline crack, or an indicator of the profit for refining crude into the fuel, hit a three-month high above $15 a barrel.

The dollar headed for its biggest daily loss in nearly two weeks against a basket of currencies, making commodities denominated in the greenback, including oil, more affordable for holders of the euro and other currencies.