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US oil settles at $43.44 a barrel, up 14 cents, or 0.32%

A Shell Oil facility in Carson, California
Mike Blake | Reuters
A Shell Oil facility in Carson, California

Oil prices recovered on Tuesday from six-week lows, with U.S. crude rising as much as 1 percent, as the market weighed up OPEC comments that a possible production freeze agreement could last longer than expected.

U.S. gasoline futures tumbled 4 percent after Colonial Pipeline said it expects to restart its main 1.3 million barrel per day gasoline line on Wednesday after being shut for more than a week to fix the biggest leak in nearly two decades.

The news encouraged traders to sell gasoline and buy back crude as fears of fuel shortages eased, Again Capital founding partner John Kilduff said.

U.S. West Texas Intermediate (WTI) crude futures rose 14 cents to $43.44 a barrel by 2:40 p.m. ET after falling to a nearly 6-week low of $42.55 earlier in the session.

The pending expiry after Tuesday's settlement of WTI's October delivery contract, the front-month for the U.S. crude benchmark, had also weighed in New York's morning trade.

International benchmark Brent crude oil futures were trading down 21 cents at $45.74 per barrel, after dropping to $45.09, its weakest level since Aug. 11.

Oil prices initially fell on pessimism that the Organization of the Petroleum Exporting Countries and other major crude producers will reach an output freeze deal at Sept. 26-28 informal talks in Algeria. Saudi Arabia, Iran, Iraq, Nigeria and Libya, five of OPEC's largest oil exporters, have all raised or been trying to hike output in recent months even while talking of a freeze.

Official data released late on Monday confirmed a rise in Saudi Arabian oil exports in July to 7.622 million bpd, up from 7.456 million bpd in June.

"(An output freeze) would only secure an even higher push of Saudi crude oil and would be a case where the proposed cure is worse than the disease," said Olivier Jakob, managing director of PetroMatrix in Switzerland.

But around midday, short-covering and fresh buying emerged from those fearing of a rally should OPEC announce a deal in Algeria.

OPEC Secretary-General Mohammed Barkindo said he expected the potential freeze deal between OPEC and other producers to freeze output to last one year, longer than previously thought.

Kilduff said traders also responded to a comment from Algerian Energy Minister Noureddine Bouterfa on Tuesday that OPEC members could decide to hold an extraordinary meeting to discuss oil prices immediately after an informal gathering in Algiers next week.

Bouterfa told local radio he was optimistic that participants would reach a consensus on how to stabilize the oil markets at the Algiers meeting of OPEC and non-OPEC producers on Sept. 26-28.

"It seems there are more barrels than ever coming to the market because of OPEC and there should be no fundamental reason for prices to go up," said Scott Shelton, broker with ICAP in Durham, North Carolina.

"Yet, we are seeing buying on the dips as people worry about any OPEC reduction in the near future. Also, we have very little risk premium in the market now for any severe outage among these producers."

Worries that U.S. oil stockpiles may have risen last week, however, limited gains in crude futures.

U.S. crude stockpiles likely rose 2.3 million barrels last week, analysts forecast in a Reuters poll. The American Petroleum Institute (API), a trade group, will release its weekly crude inventory report at 4:30 p.m. EDT (2030 GMT), before official stockpiles data on Wednesday from the U.S. Energy Information Administration (EIA).

CNBC's Tom DiChristopher contributed to this story.