The price of oil hit a 26-month high on Monday as producer nations signalled that they had no plans to boost output.
But it later slipped back on fears a Christmas Day interest rate hike by China may herald weaker demand there.
US crude peaked at close to $92 but fell back to about $91 a barrel. Brent crude eased $1 to about $93.50.
Meanwhile, the incoming Iraqi oil minister claimed that his country's crude output hit 2.6 million barrels per day, its highest level in 20 years.
The country hopes to increase output to 12 million barrels per day by 2016, a level that would rival Saudi Arabia.
Speaking on Monday, minister Abdulkarim al-Luaybi also promised "projects to expand oil and gas pipelines and make good use of the gas that comes out with the extraction of oil".
The ministry wants to build new pipelines to boost export capacity, a spokesman explained.
Pipeline capacity in the south of the country would be increased to 4.5 million barrels per day, while three new routes planned through Syria - including one for gas - would provide a further 2.75 million barrels of oil.
Four oil refineries are also to be built over the next five years, so the country no longer has to depend on others to convert its crude oil into petroleum products.
Supply and demand
The oil price had risen after some members of the Organization of Petroleum Exporting Countries (Opec) said the group was unlikely to meet until June to discuss production moves.
Cold weather in Europe and a blizzard in north-eastern parts of the US have also helped to push prices higher.
However, a Christmas Day interest rate rise in China prompted some concerns over growth in the country's fuel demand.
"China's interest rate hike is having some impact on the oil markets... because of concerns over how the tightening of monetary policy will impact demand growth," said ANZ oil analyst Serene Lim.
Oil prices tumbled by 4% when China last raised interest rates in mid-October.
But prices quickly recovered and have since rallied by about 15%, largely driven by the unusually cold weather seen in Europe during December and the resultant surge in fuel demand.
Some analysts are concerned that such fuel price growth will push up inflation and hurt global economic growth.
"High oil prices were one of the contributors to the last global crisis," said JBC Energy in a report.
"The largest effect of an oil price shock on the economy occurs around three to four quarters after the price spike."