By Barani Krishnan
NEW YORK (Reuters) - U.S. crude oil futures bounced off 5-1/2-year lows on Tuesday, and hovered around $55 a barrel in volatile trading near that price, with U.S. options set to expire later in the day.
Global benchmark Brent crude also pared losses after plumbing a July 2009 low below $59, but remained stuck below $60 a barrel as major oil producers said they were in no rush to cut production and curb a growing glut. Front-month January
"There's a whole lot of things going on, from the options trade in WTI to the position squaring in Brent, that's helping oil prices get some upward traction here," said Tariq Zahir, managing member at Tyche Capital Advisors in New York.
Traders cited crack spreads and other activity as Brent's premium to U.S. crude narrowed to below $4 from Monday's one-month high of around $5.
Some said options players may be seeking to defend prices around the $55 a barrel mark, hoping to avoid executing options that expire in-the-money. Open interest for January puts at the $55 strike stood at more than 13,500.
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"Good open interest on the 55 strike certainly helped," one trader said.
U.S. West Texas Intermediate (WTI) futures were down 37 cents at $55.57 a barrel by 1:38 p.m. EST (1838 GMT), off a May 2009 low of $53.60.
Brent was down 91 cents at $60.15 after plumbing a July 2009 low of $58.50.
The market was driven down earlier by Russia's failed emergency rate hike to stabilize the rouble, an investor flight to safe-havens such as gold and the yen from troubled emerging market currencies and slowing industrial activity in China.
Russia's decision not to cut its oil output, matching producer group OPEC's stance, also weighed on sentiment.
Oil prices are headed for their worst year since 2008, having tumbled almost 50 percent since June when Brent traded above $115 and U.S. crude above $107.
Many traders and analysts say the market is possibly oversold but are unable to predict when it will begin trending up, let alone return to its $100 heyday.
"Prices will ... bottom when they start to impact supply. Nobody can tell you at what price level this will be, to be honest," Carsten Fritsch, senior oil and commodities analyst at Frankfurt's Commerzbank, told the Reuters Global Oil Forum.
Commerzbank expects more volatility in the first half of 2015 before a recovery over the next six months, he said. "The key is non-OPEC supply, (that's) where the rebalancing of the oil market must come from."
(Additional reporting by Catherine Ngai in New York, Alex Lawler in London and Henning Gloystein in Singapore; Editing by Jason Neely, Michael Urquhart, David Gregorio and Meredith Mazzilli)