Brent crude climbed above $106 per barrel on Wednesday, recovering some lost ground after oil was hit by speculation the US Federal Reserve may soon start to reduce its monetary stimulus and expectations of a build-up in US crude stocks.

Appetite for risk assets such as oil fell on Tuesday on worries about reduced liquidity after Atlanta Fed President Dennis Lockhart said a reduction in the Federal Reserve's monthly $85 billion bond purchases remained a possibility at the central bank's next policy meeting on December 17 and 18.

Brent for December delivery was 25 cents higher at $106.06 per barrel at 0208 GMT, after settling 59 cents lower on Tuesday.

US crude was up 15 cents at $93.19 per barrel. The contract fell more than $2 a barrel on Tuesday, hitting a four-and-a-half-month low.

"Traders are just trying to second-guess what the Fed's next move will be," said Ben le Brun, a market analyst at OptionsXpress in Sydney.

"It wouldn't surprise me to see oil prices going a little bit higher, given the falls we've seen, but confirmation of a rebound will not happen until we know what the Fed's intentions are," he said.

Nevertheless, expectations of an increase in US crude stockpiles put a lid on gains. A preliminary poll of Reuters analysts forecast a one million barrel rise when the US Energy Information Administration publishes its data on Thursday.

Industry group the American Petroleum Institute will release its report on US crude stocks on Wednesday at 2130 GMT.

OPEC PUMPING

Output from the Organization of the Petroleum Exporting Countries remains higher than next year's global requirement for its crude, the group said in its monthly report on Tuesday, even after Saudi Arabia cut production from a record high level in October.

Opec forecast demand for its oil in 2014 would average 29.57 million barrels per day (bpd), unchanged from its previous estimate. The oil cartel pumped 29.89 million bpd in October, according to secondary sources cited by the report.

The continuing loss of about one million barrels per day of Iranian barrels has supported oil prices, with the lack of success at weekend talks on the country's nuclear programme lifting Brent off last week's four-month low.

Investors were waiting for the next round of talks on November 20 for clearer signals as to whether sanctions against Tehran will be relaxed.

However, supply from Libya looked unlikely to return to normal as the government struggles to cope with protesters who have taken over eastern oil ports and a western terminal.

Protesters demanding more rights or better conditions blocked the front gate of the Zawiya refinery and oil port on Tuesday, but production continued at the 120,000 barrel-per-day plant.

In China, leaders said markets would play a decisive role in the economy under reforms to be pushed through by 2020, although the statement issued at the end of the Communist Party's four-day meeting on Tuesday was short on details. - Reuters