Oil prices were lower in volatile trading as the market weighed Russia's comments about a possible meeting with Saudi Arabia that renewed hopes for a production freeze deal against a bigger-than-expected U.S. crude inventory build.
That followed a surge of almost 6 percent on Tuesday on news the Organization of the Petroleum Exporting Countries would renew efforts to limit production.
Russia said it was ready to support OPEC's decision on an oil output freeze. Russian Energy Minister Alexander Novak said on Wednesday he sees big chances that the oil producers' group can agree on the terms of the freeze by Nov. 30.
Meanwhile, the U.S. Energy Information Administration said crude stocks increased for a third straight week and rose by a bigger-than-expected 5.3 million barrels last week, topping analysts' 1.5 million-barrel build in a Reuters poll.
"Fundamentals are weighing on oil prices following the release of the weekly oil inventory report from the U.S," said Abhishek Kumar, senior analyst at Interfax Energy's Global Gas Analytics in London.
"Price volatility will increase as we approach the OPEC meeting scheduled for Nov. 30, but markets will not ignore fundamentals," Kumar said.
Venezuelan President Nicolas Maduro said he will meet with OPEC secretary-general Mohammed Barkindo in Caracas on Wednesday to discuss the freeze.
A number of energy ministers from OPEC countries are also likely to meet informally in Doha on Friday to try to build consensus over decisions taken by the full group in September in Algiers, an Algerian energy source said.
Those informal meetings could include energy ministers from Saudi Arabia and Russia. But Iran's oil minister will not be attending, sending the country's OPEC governor instead, sources said.
"We see enough cooperation between these two oil power houses to keep a significant amount of OPEC premium embedded in the market," Jim Ritterbusch, president of Chicago-based energy advisory Ritterbusch & Associates, said in a note.
Two sources familiar with discussions said efforts were under way to narrow gaps and a final agreement would be reached. One issue has been the level of production at which Iran would be expected to freeze its output.
Sources say Iran wants an output cap of 4 million barrels per day, while other members of the Organization of the Petroleum Exporting Countries want Iran to freeze supply at about 3.7 million bpd.
"We estimate the possibility of an actual OPEC production cut as 50-50," said Hans van Cleef, senior energy economist at ABN Amro.
"If OPEC would stick to its intention to set its production ceiling at 32.5 million barrels a day, or even lower, market optimism will likely pick up, which could be supportive for oil prices."
The Dutch bank lowered its oil price forecasts on Wednesday, expecting Brent and U.S. crude to average $50 a barrel in the fourth quarter.
In a bullish signal for the oil market, the International Energy Agency (IEA) said on Wednesday oil consumption will peak no sooner than 2040 despite the entering into force of the Paris climate deal which intends to wean the world off fossil fuels by the end of the century.
— CNBC's Tom DiChristopher contributed to this report.