Updated from 2:55 a.m.

Oil prices retreated Wednesday after nearing $40 a barrel and a one-month high Tuesday on indications the Organization of Petroleum Exporting Countries is committed to boosting production in August.

The benchmark U.S. crude settled at $39.08, off 57 cents, or 1.4%, while gasoline prices closed a fraction of a cent higher at $1.273 a gallon.

Saudi Arabia -- the cartel's dominant member and the world's largest oil exporter -- said OPEC would go ahead with a plan to increase production by another half million barrels a day, according to media reports.

At its June meeting, OPEC said it would increase its official output ceiling by 2 million barrels a day in July and left the door open for a second increase in August, pending another meeting July 21 in Vienna.

The Saudi move comes at a time of renewed short-term supply concerns for the market. Prices closed below $36 last week, only to rally back to end near $40 Tuesday.

The latest leg of the rally yesterday was a reaction to news that Iraq's oil exports had once again been disrupted over the weekend, a strike by some oil workers in Nigeria that trimmed output there and financial concerns about the giant Russian oil company Yukos, which is under pressure from Moscow to make huge tax payments.

Oil prices had fallen as much as 15% from their record high of more than $42, touched right before OPEC's meeting in Beirut five weeks ago. Traders bid up prices on short-term supply concerns triggered by strong global demand and terrorist attacks on oil industry personnel and facilities in the Persian Gulf region ahead of the peak summer driving season in the U.S. and Europe.