Benchmark oil rose 23 cents to finish at US$85.79 per barrel in New York. It was the first time crude closed higher after falling for five straight sessions.
The Fed holds a two-day policy meeting and is expected to unveil a new bond-buying program designed to perk up the slowly recovering U.S. economy.
Traders are also watching budget negotiations in Washington. There's little sign that Congress and the White House are near an agreement that would avoid tax increases and spending cuts that economists warn pose the threat of another recession.
Oil also got a boost from a survey that indicated German investors believe Europe's largest economy may escape a recession despite the region's economic struggles.
At the pump, the U.S. average for gasoline fell about a penny overnight to $3.328 per gallon, according to AAA, Wright Express and the Oil Price Information Service. That's about five cents more than a year ago.
In other futures trading Brent crude, used to price international varieties of oil, rose 68 cents to end at $108.01 per barrel in London.
On the New York Mercantile Exchange:
— Heating oil rose three cents to finish at $2.93 per gallon.
— Wholesale gasoline rose one cent to end at $2.61 per gallon.
— Natural gas fell five cents to finish at $3.41 per 1,000 cubic feet.
(TSX:ECA, TSX:IMO, TSX:SU, TSX:HSE, NYSE:BP, NYSE:COP, NYSE:XOM, NYSE:CVX, TSX:CNQ, TSX:TLM, TSX:COS.UN, TSX:CVE)