Brent crude oil prices slipped towards $55 in the last hour of trading after an announcement from Saudi Arabia that its daily oil production neared record highs outweighed a weakened dollar.
After rising as high as $56.17 in the day's trading, Brent crude oil futures were down 20 cents at $55.12 at 1:35 EDT (1835 GMT). U.S. WTI crude rebounded to trade 8 cents up at $46.65 after falling as low as $45.38.
Saudi Arabia has stood firm on its decision to maintain production levels, saying it would consider cutting output only if producers outside OPEC also did so.
Saudi Oil Minister Ali al-Naimi said the kingdom was now pumping about 10 million barrels per day, which could indicate an increase of 350,000 bpd over its February production.
Oil prices have seesawed in recent days, weighed down by oversupply concerns but boosted by the weakening of the dollar ahead of the expected end of years of zero-interest rate policy in the United States later this year.
Houston-based Schlumberger Ltd, the world's top oilfield services provider, said oil prices could increase in the second half of the year as it expected global industry spending on exploration and production to drop 10 percent to 15 percent in 2015.
On Monday, oil reversed earlier losses after the dollar renewed its slide, losing 0.5 percent against a basket of currencies.
"The dollar is under pressure, and we saw buyers coming into the market as a result," said Tradition Energy senior analyst Gene McGillian.
Barclays analysts forecast on Monday that if OPEC production holds near current levels of almost 30 million bpd, the market surplus would expand from 900,000 bpd to 1.3 million bpd.
China's February crude oil imports from Iran fell 3.7 percent from a year earlier to 2.04 million tonnes. China boosted overall imports late last year, taking advantage of cheap oil to build its reserves, but storage tanks could be reaching their limits, forcing a slowdown in orders.
(By Sam N. Adams; Additional reporting by Ron Bousso in London; Editing by Jason Neely, Dale Hudson, Lisa Von Ahn and Andrew Hay)