Benchmark oil for October delivery was up 15 cents to $105.57 at midday Bangkok time in electronic trading on the New York Mercantile Exchange. The contract fell $1.17 to close at $105.42 on Tuesday. Oil fell $1.62 on Monday.
Following the 2008 financial crisis, the U.S. central bank has been buying bonds and other assets to push down interest rates and make loans more available. Global stocks and commodities surged as the new money generated by the unconventional program, which is currently running at $85 billion a month, flowed through the financial system.
The Fed, however, is widely expected to begin winding down the program as the U.S. economy shows signs of a sustained albeit gradual recovery and could announce the first reduction on Wednesday following a two-day policy meeting.
The prospect of a reduction in stimulus pushed down oil prices earlier this week, but now traders are looking ahead, seemingly less fearful of the impact of "tapering," since analysts believe the Fed will keep official interest rates low to keep the U.S. economy chugging along.
Analysts at Capital Economics said in a commentary that "a small reduction is probably now discounted and the Fed may choose to reiterate its conditional commitment to keep interest rates very low for a long period."
Investors will also be monitoring fresh information on U.S. stockpiles of crude and refined products. U.S. Energy Department data for the week ended Sept. 6 is expected to show a decline of 1.5 million barrels in crude oil stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
Brent crude, the benchmark for international crudes used by many U.S. refineries, dropped 19 cents to $108 a barrel on the ICE Futures exchange in London.
In other energy futures trading in New York:
— Wholesale gasoline fell 0.2 cent to $2.648 per gallon.
— Natural gas was steady at $3.745 per 1,000 cubic feet.
— Heating oil declined 1.4 cents to $2.984 per gallon.