Benchmark oil for July delivery was down 5 cents to $83.98 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose 76 cents to settle at $84.03 in New York on Tuesday.
In London, Brent crude for August delivery was up 10 cents at $95.86 per barrel on the ICE Futures exchange.
A two-day Fed meeting ends later Wednesday amid speculation the central bank may announce monetary measures to increase money in circulation and spur lending. Crude has risen from $81 last week and global stock markets have jumped this week on optimism global policymakers will soon implement fiscal and monetary stimulus to revive waning economic growth and oil demand.
"Sustaining a rally in oil will likely require some bullish surprises out of the Fed announcement," energy trader and consultant Ritterbusch and Associates said in a report.
The failure of high-level nuclear talks between Iran and six world powers this week in Moscow also boosted crude.
On Tuesday, European Union foreign policy chief Catherine Ashton said negotiations have been paused indefinitely and will resume only if a low-level July 3 meeting of technical experts in Istanbul finds enough common ground to warrant such a step.
Western nations acknowledged huge differences between the two sides but insisted the diplomatic track had not been derailed. However, the lack of progress in Moscow is sure to be seen by critics as a sign that talks are ineffective at persuading Tehran to curb the uranium enrichment that could be used to develop nuclear weapons.
A military attack by the U.S. or Israel on Iran's nuclear facilities could disrupt global oil supplies.
A U.S. crude supply report showed demand was mixed last week. The American Petroleum Institute said late Tuesday that crude inventories fell 550,000 barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted a decrease of 600,000 barrels.
Inventories of gasoline rose 1.1 million barrels last week while distillates tumbled 269,000 barrels, the API said.
The Energy Department's Energy Information Administration reports its weekly supply data—the market benchmark—later Wednesday.
In other energy trading, heating oil was up 0.5 cent at $2.64 per gallon while gasoline futures rose 0.2 cent at $2.57 per gallon. Natural gas gained 3.5 cents at $2.58 per 1,000 cubic feet.
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