"Risk appetite is back, and that is mainly due to the falling dollar, which is adding fuel to the rally in crude," OANDA senior market analyst Ed Moya said in a note. "The oil market still remains tight and seems poised for further shortages as growth outlooks globally seem to be improving."

The ICE US Dollar Index has seen four consecutive lower sessions and was holding at 108.36 in afternoon trading -- on pace to close at the lowest since Aug. 19.

The market is pitting supply concerns against expectations of further interest rate rises and fears of demand destruction, which have all contributed to volatility.

"There has been no pushback from any Fed official on the market view that a 75 basis-point hike at the Sept. 20-21 [Federal Open Market Committee] meeting is a near sure thing," ANZ Research senior economist Tom Kenny and junior economist Arindam Chakraborty said in a note Sept. 12.

"Fed officials are tilted to doing too much tightening rather than too little, as the latter may lead to an unmooring of inflation expectations. The economic cost to reanchor inflation expectations would be substantial and far greater than tightening too much now."

NYMEX October RBOB rallied 1.17 cents to $2.4448/gal, and November ULSD finished up 2.44 cents at $3.6031/gal.

Still, market analysts noted that supply uncertainty will likely support near-term sentiment, setting a floor for prices.

The OPEC+ group has signaled its intent to defend prices and cut October volumes a marginal 100,000 b/d, but more significant cuts could come down the road if prices continue to slide, analysts at Platts Analytics said Sept. 9.

"The oil charts also seem to give a bottom signal closing back above the all-important support line yesterday after failing to follow through on a new low that they made in early morning trading," Price Futures Group analyst Phil Flynn said.

"Extreme volatility remains, yet the tight supply situation should overtake the economic fears, especially with winter right around the corner."

A potential strike by freight rail workers in the US could cost the economy $2 billion daily, according to a report Sept. 12 from the Association of American Railroads.

Approximately 186,000 b/d of crude oil traveled by rail in June, according to Energy Information Administration data.