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Oil traded near $50 a barrel after the biggest slide in four days as investors weighed forecasts for slowing US crude output against signs that the market is oversupplied.
Futures were little changed in New York after paring an increase of as much as 2.2 per cent. The Energy Information Administration (EIA) reduced its US production outlook as the price slump curbed drilling activity. The nation's crude stockpiles probably increased again last week from highest in about three decades, a Bloomberg News survey showed before a separate EIA report on Wednesday.
Volatility is close to the highest in six years as US crude stockpiles expand while a record number of drilling rigs are pulled off the nation's oil fields. Crude may resume its slide as continuing US output growth leads to a "dramatic" increase in inventories, according to Vitol Group, the world's largest independent oil trader.
"Oil rising to above $50 is a reaction to prices declining too far too fast," Andy Sommer, an analyst at Axpo Trading AG in Dietikon, Switzerland, said. "We expect the fundamentals will worsen on further oversupply and push onshore physical storage capacity to its limit, and prices will retreat in the next couple of weeks."
