The oil market fluctuated Monday morning as traders weighed recession concerns, but by midafternoon had fallen $1.97 to $55.07 a barrel.

Japan announced Monday that its economy slipped into recession for the first time since 2001. This indicated a possible drop in demand, heightening traders’ expectations that OPEC might have to slash production further in order to stabilize the oil market.

“The question is how long and deep the recession would be,” said Fadel Gheit, Managing Director and senior analyst at Oppenheimer & Co. “If people saw that we had a shallower or shorter than expected recession, that will always put oil prices up and influence OPEC’s decision to cut output.”

OPEC already announced a production cut last month, in which quotas were cut by 1.5 million barrels a day.

Tom Hartmann, a commodity analyst at Altavest Worldwide Trading Inc, believes that a more “meaningful cut” is necessary. OPEC’s "last emergency cut did not even come close to meeting the estimate for the drop in demand.”

OPEC President Chakib Khelil suggested Sunday that the group will not cut production at its December 17 meeting, further influencing crude oil prices.

Khelil said that Iran’s request for more cuts is “a wish,” according to an Associated Press report.

Crude oil is currently hovering around being virtually unchanged, trading at $56.85, after deviating between selling higher and lower throughout Monday morning.

Oil prices have plunged nearly 62% since its mid-July peak at almost $150 a barrel.

Hartmann identifies production cuts as a long-term factor on prices, while pointing to the weaker dollar as the force driving Monday’s market.

“I think the weaker dollar is sparking a little bit of support in the commodity market today. Typically when we have seen strength in the dollar, oil was down.”

Analysts have also attributed the volatility in the market to a number of other factors.

Some industry participants believe that demand is seasonal, explaining that winter is a considerably low-demand time of year. “If it was summer, we might see a rebound in demand due to summer driving,” Hartmann said.

Jim Ritterbusch, president of Ritterbusch & Associates, attributes the early-morning strength to the higher-than-expected industrial production numbers released this morning.

The U.S. Navy announced Monday that pirates have hijacked an enormous crude oil tanker with 25 crew members off the Kenyan coast.

“What we could see is some short-term disruption in supply,” Hartmann said. “We might look at some alternative shipping routes for oil and for other commodities. There probably won’t be a long-term effect, but it could back things up in the short term.”

In other energy markets, wholesale gas was two cents lower at $1.22 a gallon, and natural gas was 16 cents higher at $6.47. Heating oil was practically unchanged.

Gold was up $1.80, trading at $744.20.