Light, sweet crude for March delivery dropped 32 cents to US$55.05 a barrel in electronic trading on the New York Mercantile Exchange mid-afternoon in Singapore. Brent crude for March dipped 17 cents to US$55.26 a barrel on the ICE Futures exchange in London.
Crude prices initially fell more than US$1 a barrel Wednesday after the U.S. Energy Information Administration reported a larger-than-expected build in gasoline stockpiles and a surprise increase in distillates.
But then futures rebounded as traders weighed other factors in the report and the possibility of colder weather in the U.S. The contract settled 33 cents, or 0.6 percent, higher at US$55.37 a barrel Wednesday in New York, the highest settlement since Jan. 9.
Market watchers said, however, prices were not expected to sustain above the US$55 a barrel-level.
"I don't think it will stay higher than US$55. OPEC will try to maintain the US$50 mark but they're fighting strong bearish sentiments in the financial market. They're peddling uphill," said ANZ Global Natural Resources analyst Andrew Harrington in Sydney.
Larger than expected crude stockpiles despite the cold weather in the U.S. East Coast are also likely to weigh down prices, Harrington said.
Oil prices also rose Wednesday after ConocoPhillips' Chief Executive Jim Mulva said that the company was firmly instructed to curb output in its Libya and Venezuela operations. The comments led some traders to abandon their skepticism that the Organization of Petroleum Exporting Countries would not enforce the production cuts announced late last year, reports AP.
"The ConocoPhillips story is another sign that OPEC is starting to comply more with cuts that were announced last year," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Heating oil futures for February rose fractionally to US$1.5840 a gallon (3.8 liters) while natural gas prices fell 16.5 cents to US$7.256 per 1,000 cubic feet.
According to a source in the Russian Defence Ministry, Russia started deploying elite commando units in eastern Libya. Russian GRU officers, mercenaries and advisors have arrived in Libya