Oil prices rose strongly again on Monday, tacking on a total of 11 percent over two straight sessions, as some investors bet that a bottom had formed to the seven-month long rout on the market even as others remained pessimistic.
Benchmark Brent and U.S. oil futures swung in a band of about $4 a barrel, one of their widest in weeks, as near-term technical signals indicated further gains while fundamental data continued to weigh on the market.
The spread between the two oils <CL-LCO1=R> widened to above $5 a barrel, its widest since November.
Traders said oil services company Genscape estimated a stock build of 2.3 million barrels in the Cushing, Oklahoma, delivery point for U.S. crude last week, adding to already record-high inventories in the United States.
A U.S. refinery strike, which theoretically meant higher crude supplies in the market, along with disappointing U.S. consumer spending and manufacturing data, also knocked oil prices off early highs.
"I don't think anything's changed fundamentally, except for the psychology of the market," said Chandravir Ahuja, an analyst at Kolmar Americas Inc in Bridgeport, Connecticut. "We're moving a lot more on headlines that we probably would on a normal day."
Brent settled up $1.76, or 3.3 percent, at $54.75 a barrel, swinging between a session high of $55.62 and a low of $51.41.
U.S. crude closed up $1.33, or 2.8 percent, at $49.36 a barrel, moving between $50.56 and $46.67.
"I think people were trying to play off again on Friday's rally on the assumption that the market's found a bottom, but I don't think that's the case yet," said Tariq Zahir, managing member of Tyche Capital Advisors in Laurel Hollow, New York.
Prices jumped about 8 percent on Friday, the biggest daily gain since 2009 for Brent, after data showed the number of U.S. oil drilling rigs had fallen the most in a week in nearly 30 years. Month-end covering by traders taking profits on earlier short positions added to the rally.
Speculators in Brent had raised their net long positions by 1,056 contracts to 143,039 in the week to Jan. 27, exchange data showed on Monday, as some took the view that prices were stabilizing from the sell-off that began in the summer.
Technical indicators also showed Brent might be on the way up.
"It closed above the 20-day moving average on Friday for the first time since July," SEB chief commodity analyst Bjarne Schieldrop, said, adding that some thought "maybe this is the time to buy."
(By Barani Krishnan; Additional reporting by Robert Gibbons in New York, Claire Milhench and Himanshu Ojha in London and Gloystein in Singapore; Editing by Dale Hudson, David Clarke and Jonathan Oatis)