Worries about disruptions to supply, while still a significant factor, eased slightly after the United States said it did not believe Israel had made a decision to attack Iran.

Brent crude was 2 cents higher at $114.05 per barrel by 0845 GMT, after ending up 43 cents at its highest settlement since May 3 on Tuesday. U.S. crude fell 10 cents to $93.33 after closing 70 cents higher.

ECB President Mario Draghi has said the bank will flesh out plans to bring some stability back to strained euro zone bond markets early next month, driving hopes the bloc could start to right itself again in the second half of the year.

There are also hopes that the Federal Reserve may announce plans to print money to boost the economy.

"The market is still waiting for any indication that there will be an announcement on quantitative easing by (Federal Reserve Chairman) Ben Bernanke, and we'll be in a holding pattern," Gareth Lewis-Davies at BNP Paribas said.

Hopes of an imminent announcement were dampened, however, after July retail sales numbers came in better than expected.

U.S. Defense Secretary Leon Panetta, who visited Israel two weeks ago, told reporters it was important that military action be the last resort.

The comments helped ease worries of a conflict after Israeli Prime Minister Benjamin Netanyahu said on Sunday that most threats to Israel's security were dwarfed by the prospect that Iran could obtain nuclear weaponry.

Brent has swung between a high of more than $128 per barrel and a low of $88.49 this year as investors' focus has moved between heightened Middle East supply worries and a weakening growth outlook.

The range of nearly $40 is the widest since 2009, when it was $40.91. In 2011 the range was $34.65 and in 2010 $27.33.

INVENTORIES WATCHED

A surprise increase in stockpiles in the world's biggest oil consumer is also weighing on prices.

Total crude inventories rose 2.8 million barrels in the week to August 10, the American Petroleum Institute said, compared with analysts' expectations for a drawdown of 1.7 million.

The API data will be followed by more closely watched numbers from the U.S. Energy Department at 1430 GMT, providing a pointer to the country's demand growth outlook.

Yet Brent futures are unlikely to dip much further as a drop in North Sea crude output and lingering supply worries put a floor under prices, analysts said.

"Crude might get stronger because of the issues with North Sea production," said Victor Shum, a consultant at IHS Purvin & Gertz. "Definitely the Iran sanctions are already starting to have an effect, and we can see the obvious effects on crude prices."

(Additional reporting by Manash Goswami and Elizabeth Law in Singapore, editing by Jane Baird)

• A Permanent Economic Emergency