U.S. oil prices broke a four-session losing streak Tuesday after posting big swings earlier in the session, as traders wagered on shrinking supplies and jockeyed to detect a bottom in a market that has plunged nearly 50% since June.
Continue Reading Below
The benchmark U.S. oil price settled 2 cents higher at $55.93 a barrel on the New York Mercantile Exchange. Prices traded as low as $53.90 a barrel and as high as $57.15 a barrel in the session.
Brent crude, a global price gauge, recently traded down 2.1% at $59.80 a barrel, on track for its lowest settlement since May 2009.
Few traders believe the recent strength in the oil market suggests a sustained rebound. Oil prices have sunk in recent months on concerns that ample global supplies are outweighing tepid demand growth.
"It's not surprising for there to be people trying to bottom-fish" after oil prices hit a succession of five-year lows, said Anthony Lerner, senior vice president of industrial commodities at brokerage R.J. O'Brien & Associates LLC.
Some market watchers expected that weekly U.S. data on the nation's petroleum markets, due out on Wednesday, will show a decline in crude-oil supplies last week.
Analysts expect the U.S. Energy Information Administration to report that oil supplies fell by 1.9 million barrels last week, while gasoline stocks rose by 2 million barrels and distillate inventories rose by 1 million barrels. They also expect that refineries ran at 95.3% of capacity, an unusually high rate, to take advantage of cheap domestic crude supplies. "The refiners are still cranking it out," said John Kilduff, founding partner of Again Capital, a fund that invests in energy commodities.
The American Petroleum Institute, an industry group, is scheduled to release its inventory data for the same period later Tuesday.
Contract expirations could also be causing volatility in the market, as traders close out positions. The front-month Brent contract for January delivery expires at settlement Tuesday.
Nymex options for January crude oil also settled Tuesday, with a large number of positions around the level where the market settled. Traders who had used options to bet on lower prices may have had to buy futures contracts ahead of expiration, said Oliver Sloup, director of managed futures at brokerage iiTrader in Chicago.
"A lot of traders have definitely been on the short side," meaning they have bet on lower prices, Mr. Sloup said. "We're seeing some of those shorts starting to cover those positions."
Prices at the pump have dropped as well. Retail gasoline on average cost $2.53 a gallon in the U.S. on Tuesday, according to AAA, down from $3.23 a gallon a year ago. Gasoline prices haven't fallen to the same degree in other countries due to currency conversions, taxes and fuel subsidies in some places.
The drop in oil prices earlier Tuesday rattled financial markets and currencies around the globe. In a dramatic overnight move, the Russian central bank raised its key interest rate to 17% from 10.5% after the ruble's sharpest daily drop against the dollar in more than a decade.
In Tuesday's early trading, oil prices tumbled on weak economic data out of Europe and China, with Brent crude falling below $60 a barrel for the first time since May 2009.
Concerns about what slowing economic growth means for oil demand are compounded by a steady flow of supplies.
The Organization of the Petroleum Exporting Countries won't call for an emergency meeting unless something drastic happens in the oil market, the United Arab Emirates' oil minister said Monday.
On Tuesday, Russian Energy Minister Alexander Novak said that his country would maintain its current level of oil production next year.
"Not only are we having an increase in supply, but we're having a decrease in demand" from previous estimates, Mr. Sloup said. "You look at Economics 101, and that's a terrible scenario."
January reformulated gasoline blendstock, or RBOB, fell 3.54 cents, or 2.2%, to $1.5410 a gallon, the lowest settlement since May 1, 2009.
January diesel slid 4.17 cents, or 2.1%, to $1.96 a gallon, the lowest level since Aug. 24, 2010.
(Georgi Kantchev, Eric Yep, Asa Fitch and Summer Said contributed to this article.)