Oil futures fluctuated Tuesday as fresh fighting erupted in Libya's capital, underscoring the uncertainty over how quickly the rebels can secure peace and restart the country's oil production.

"Guys are still trying to figure out what to make of this whole market," said Peter Donovan, vice president at oil options brokerage Vantage Trading. "With these Libyan barrels--are they coming on? Are they not coming on?"

Brent crude, the European benchmark that has been more sensitive to headlines out of Libya, traded as high as $109.25 a barrel in early London trading, before pulling back as the U.S. session kicked off. The front-month October contract recently traded down 43 cents, or 0.4%, to $107.93 a barrel.

Light, sweet crude for October delivery on the New York Mercantile Exchange was recently down 12 cents, or 0.1%, at $84.30 a barrel.

Heavy fighting was reported on the streets of Tripoli on Tuesday, a day after the rebels entered the capital with surprising ease. Uncertainty over the rebels' grip on the city was further highlighted by the sudden appearance of Col. Moammar Gadhafi's son, who was thought to have been arrested and who described Gadhafi as "safe and in Tripoli."

Uncertainty persists over how quickly the country--which exported 1.3 million barrels a day of oil before the conflict began--can resume pumping oil. The state of the country's oil infrastructure remains unknown after six months of fighting, and many oil producers that used to operate in Libya said they have no timetable to resume operations.

Still, some analysts say the cash-starved rebels are likely to move swiftly to resume oil exports--assuming they can establish control over the country.

"Chances are, they will want cash or gold," said Peter Beutel, head of the trade advisory firm Cameron Hanover, of the rebels. "In order for this new democracy to attract enough support, it will need to get oil flowing right away."

Some companies have also said oil could start flowing again soon. Eni SpA, Italy's largest oil company, has sent a technical team to assist in the resumption of operations in Libya, a spokesman for Italy's Foreign Affairs Ministry said Monday.

"I think you'll see other companies do the same," said Tom Bentz, a director at BNP Paribas Commodity Futures, adding that "you'll see Libyan crude back on the market sooner rather than later."

Later in the week, oil market participants are likely to shift their focus back to the U.S., where Federal Reserve Chairman Ben Bernanke is due to give his annual speech at a meeting of central bankers and economists in Jackson Hole, Wyo., Friday.

Some investors believe Bernanke could suggest additional monetary stimulus measures are on the way. Such moves would mean a weaker dollar and stronger prices for crude, which tend to rise when the dollar weakens as the commodity becomes cheaper for foreign-currency holders.

The dollar gave back some ground Tuesday, with the ICE Dollar Index falling 0.4% to 73.870 recently.

Front-month September reformulated gasoline blendstock, or RBOB, recently traded down 0.88 cent, or 0.3%, to $2.8263 a gallon. September heating oil traded down 0.61 cent, or 0.2%, to $2.9046 a gallon.