Oil prices seesawed near unchanged in volatile trading on Tuesday, as investors eyed a U.S. Federal Reserve two-day policy meeting for any signal of a change in monetary policy.
The U.S. dollar remained under pressure on expectations that the Fed will keep monetary policy accommodative, helping support dollar-denominated oil prices that have benefited by attracting investment as a hedge against inflation.
Comments by the chief of Saudi Arabia's state-run firm Aramco voicing concern about the impact of high oil prices on the global economy weighed on crude early Tuesday, but the weak dollar helped oil recover.
The Saudi view contrasted with U.S. Treasury Secretary Timothy Geithner's remarks that oil, at current levels, on its own, it won't put the recovery at risk.
A power outage that affected operations at several refiners in the Texas City, Texas, region near Houston lifted U.S. gasoline and heating oil futures and helped keep crude futures supported.
Brent crude for June rose 27 cents to $123.93 a barrel by 12:09 p.m., having reached $124.40.
U.S. crude for June dipped 15 cents to $112.13.
While Tuesday's intraday peak was $112.64, U.S. crude reached $113.48 on Monday, highest intraday price since September 2008, before the contract ended the day down 1 penny.
Analysts and brokers said investors would be cautious awaiting the result of the U.S. Federal Reserve's two-day policy meeting that starts on Tuesday and will include a news conference on Wednesday.
This week, it will be all about the Fed meeting. Volume and volatility will come back after the meeting, said Olivier Jakob of Petromatrix in Switzerland.
Oil investors also awaited weekly oil inventory reports expected to show crude stocks rose last week. A Reuters poll on Monday expected gasoline stocks to be lower, posting what would be a 10th consecutive weekly decline.
The forecast was for distillates to be up slightly, with refinery capacity utilization also rising.
Industry group the American Petroleum Institute (API) will issue its weekly inventory data at 4:30 p.m. EDT on Tuesday, with the government's report issued by the U.S. Energy Information Administration following on Wednesday at 10:30 a.m. EDT.
(Additional reporting by Ikuko Kurahone in London and Manash Goswami and Florence Tan in Singapore; Editing by David Gregorio)