US oil settles at $45.50 a barrel, up 67 cents, or 1.49%

A worker stands next to a pump jack at an oil field Sergeyevskoye owned by Bashneft company north from Ufa, Bashkortostan, Russia.
Sergei Karpukhin | Reuters

Oil prices edged 1 percent higher on Wednesday in a volatile session as the market weighs the prospect of higher supplies against the possibility that the world's top producers could agree on a production freeze.

Brent futures rose 68 cents, or 1.44 percent, to $47.94 a barrel, by 2:36 p.m. ET. U.S. crude rose 67 cents, or 1.49 percent, to $45.50 per barrel.

Pioneer's Dove: I can see getting to $50-$60 oil next year
Pioneer's Dove: I can see getting to $50-$60 oil next year

"The market is trying to establish a balance in the mid $40s with supply being relatively high internationally versus the prospect that OPEC and non-OPEC members might come to an agreement that would support markets," said Tony Headrick, energy analyst at CHS Hedging LLC in St Paul, Minnesota.

Oil hit a one-week high on Monday after Russia and Saudi Arabia agreed to cooperate on stabilizing the oil market. Prices have since fallen due to uncertainty over a deal, particularly after a meeting in Doha in April among the world's largest producers to discuss output ended in failure.

The Organization of the Petroleum Exporting Countries and non-OPEC producers such as Russia are expected to discuss an output freeze at informal talks in Algeria on Sept. 26-28.

"I think we're going to be headline driven for a while. Generally, I think we'll see lower prices going forward. The upcoming meeting isn't going to do very much. If OPEC freezes at these levels, these are record levels," said Tariq Zahir, analyst at Tyche Capital Advisors.

Iran has said it would cooperate on a freeze only if fellow exporters recognized its right to boost market share to levels reached before the imposition of nuclear-related sanctions, which have now been lifted.

"Iran is still talking about pre-sanction numbers and even with the production freeze, you're still at such a high level," Zahir said.

Trade in the dollar was choppy, turning positive against a basket of currencies by mid morning after early weakness following soft U.S. economic data on Tuesday.

Non-U.S. investors take advantage of a relatively cheaper currency to buy dollar-denominated assets, such as oil.

U.S. commercial crude inventories likely dropped by 100,000 barrels last week after rising for two straight weeks, a preliminary Reuters poll showed on Tuesday.

The American Petroleum Institute releases its weekly oil data on Wednesday at 4:30 p.m. EDT, delayed by a day due to a long weekend holiday.