Oil prices spike in volatile trade

The benchmark Brent crude contract lost ground Tuesday, slipping to $49.65 in early afternoon European business while US's WTI contract eased to $48.19 (AFP Photo/David Mcnew)

New York (AFP) - Oil prices rallied Thursday in volatile trading, partly erasing the prior day's heavy losses in what analysts said was mostly a technical rebound.

US benchmark West Texas Intermediate (WTI) for delivery in March surged $2.73 (4.2 percent) to $50.48 a barrel.

Brent North Sea for March, the European benchmark, settled at $56.57 a barrel in London trade, advancing $2.41 (4.4 percent) from Wednesday's closing level.

"Volatility is rampant in oil markets right now; prices are gyrating up and down by 5.0 percent every other day as traders jostle for position," said Jasper Lawler, market analyst at trading group CMC Markets UK.

Matt Smith of Schneider Electric said that Thursday's action was more than anything caused by a technical bounce-back from steep falls.

Hammered Wednesday by official data showing another increase in US crude inventories, hitting 30-year highs, WTI shed nearly $5, or almost nine percent, echoing a price plunge in Brent that was the steepest since November.

Over the previous three sessions, oil prices had climbed nearly 20 percent as investors bet supplies would tighten in the long term because major oil companies were scaling back investments and drilling to cope with falling prices.

The market volatility in the last five days is at its highest level since 2009 on the VIX volatility index for WTI, said Ole Hansen, an analyst at Saxo Bank.

Crude has lost about 60 percent of its value since June, when prices were at more than $100 a barrel.

"The market is really looking for signs that the excess of production that was a dominant driver in the sell-off has been curtailed," said Gene McGillian of Tradition Energy.

"I don't think we can really conclude that's occurred yet."

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