U.S. crude seesawed and then settled lower, snapping a five-session streak of higher closes, after failing in early trade to push above its $86.64 intraday high from Tuesday.

With Brent's front-month November contract set to expire on Friday, the premium to U.S. crude strengthened and intraday pushed back above $26 a barrel for the first time since mid-September, adjacent to October Brent's expiration.

The spread's rise also followed the $80 billion Dow Jones-UBS Commodity Index's decision on Tuesday to add Brent as a component in 2012.

U.S. allegations that authorities had unmasked the plot by two Iranians linked to security agencies to assassinate Saudi Arabia's ambassador to the United States and recent output problems in OPEC-member Nigeria also supported Brent, brokers and analysts said.

"Brent is being lifted more by the Iran plot news," said Dan Flynn, analyst at PFGBest Research in Chicago.

Brent crude for November [LCOCV1  111.27    -0.09  (-0.08%)   ] rose 63 cents to settle at $111.36 a barrel, after earlier reaching $113 and pushing above front-month Brent's 100- and 200-day moving averages.

U.S. November crude [CLCV1  84.92    -0.65  (-0.76%)   ] fell 24 cents to settle at $85.57 a barrel, after reaching $86.59 intraday.

"U.S. crude failed to push above Tuesday's high and the Brent spread to U.S. crude has been trading in that $22 to $27 range and is being pushed up today, helped by Shell's force majeure on Nigerian oil," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

Royal Dutch Shell said it will lift by late October or November its force majeure on Nigerian Forcados crude exports if all repairs go as planned.

U.S. heating oil posted the strongest percentage gain in the oil futures complex as Brent's strength added to seasonal lift ahead of the northern hemisphere heating season. U.S. gasoline futures settled slightly higher.

Focus on Europe continues

Parties in Slovakia's fallen government struck a deal with the leftist opposition to ratify a plan to bolster the euro zone's rescue fund by Friday, reinforcing hopes that Europe's leaders can address the region's debt woes.

Also supportive to oil, euro-zone industrial production was much stronger than expected in August.

Investors seemed to shrug off the International Energy Agency and OPEC revising lower their oil demand forecasts, with both agencies citing slowing economic growth.

The U.S. Energy Information Administration (EIA) this week also cut its 2011 demand forecast but lifted its 2012 estimate by 50,000 barrels per day (bpd).

U.S. oil inventories

U.S. crude stockpiles are expected to be up 300,000 barrels, with products inventories slightly lower, according to a Reuters survey of analysts.

The report from industry group the American Petroleum Institute is due at 4:30 p.m. EDT on Wednesday, with the U.S. EIA's report following on Thursday morning. The weekly reports were delayed by Monday's Columbus Day holiday.

U.S. retail gasoline demand fell again last week, year-on-year and versus the previous week, as the price of the fuel remained above the year-ago period, MasterCard said in a weekly report.