Optimism that world's largest economies -- the United States, China and the European Union -- will implement more measures to stimulate global growth increased investors' appetite for riskier assets and pushed up equities.
Brent crude fell 28 cents to $111.72 by 1.32 a.m EDT after touching a 12-week intraday high on Tuesday in its third straight day of gains.
U.S. crude was at $93.32, down 35 cents. It settled at its highest since May 15 in the prior session, partly supported by a fire at a U.S. refinery.
"There's been a reassessment of risks in recent days," Ric Spooner, chief market analyst from CMC Markets in Sydney said.
"Mr Draghi's recent comments in the eyes of the market has reduced the probability of a near-term crisis in Europe," he said, adding that this has been driving oil prices higher.
European Central Bank President Mario Draghi said last week that the bank may again start buying government bonds, but details of how it will stabilize the bloc's bond markets have yet to be fleshed out.
In the United States, a top Federal Reserve official said on Tuesday the central bank should launch another bond-buying program of whatever size and duration is necessary to get the economy back on its feet while China pledged on Sunday to intensify its monetary policy fine-tuning in the second half of this year.
Brent broke on Tuesday a strong resistance at $111.28, the 200-day moving average, with supply of crude that underpins the Brent contract expected to drop to a record low in September.
"The loading program for North Sea crude is very low so the front-month Brent spread has firmed," Yusuke Seta, a commodity sales manager at Newedge Japan said, adding that $115 will be the next target for Brent.
The price spread between September and October Brent contracts widened to more than $1.60, up from a backwardation of $1 last week, pointing to strong prompt demand.
"Last night we had a fire at Chevron's refinery which caused gasoline prices to surge and crude followed," Seta said.
Chevron Corp (CVX.N) sought to repair the core of its Richmond refinery on Tuesday, the second-largest in California, after an hours-long fire caused regional gasoline prices to spike on worries that it could be down for months.
Oil could find more support from a hurricane threat and if crude inventories in the United States -- the world's top oil consumer -- fell more than expected last week.
Hurricane Ernesto is forecast to reemerge Wednesday in the southern Gulf of Mexico, where state oil company Pemex has port facilities and offshore platforms.
U.S. crude stocks fell sharply by 5.4 million barrels last week, the American Petroleum Institute said, well above analyst expectations for a 300,000 barrel drawdown, ahead of government data due later on Wednesday.
On Tuesday, the U.S. Energy Information Administration cut its 2012 and 2013 forecasts for crude oil production from non-OPEC countries in its monthly report and raised its world oil demand outlook for those years.
Continuing tensions in the Middle East are also helping to keep a floor under oil prices.
Western sanctions have curbed crude exports from Iran, while Syria's embattled President Bashar al-Assad won a pledge of support from Iran as his forces tried to choke off rebels in the northern city of Aleppo.
But the market could see more supply as South Sudan hopes to resume oil production in September after reaching an interim agreement with Sudan on oil export fees. It may take a year to return to full capacity, South Sudan's top negotiator said.
(Editing by Himani Sarkar)