Oil prices finished slightly higher Tuesday, after a volatile day that saw prices fall by more than $1 per barrel and then rebound to a 2007 high.
Light, sweet crude for April delivery added 7 cents to settle at $61.46 a barrel on the New York Mercantile Exchange.
During morning trading, fears about weakening oil demand from China helped prices drop as low as $60.06. By afternoon, traders instead focused on expectations of declining petroleum product inventories, and prices crossed the $62 threshold for the first time this year to climb as high as $62.25.
Brent crude for April rose 3 cents to settle at $61.36 a barrel Tuesday on the ICE Futures exchange.
"It's the bulls and bears fighting to a draw here, and we'll pick it up again" on Wednesday, said Tim Evans, an energy analyst with Citigroup Futures Research.
On Wednesday, the U.S. Energy Information Administration will report on the nation's fuel inventories, which analysts expect to show declines in gasoline and distillate stockpiles.
Distillate inventories, which include heating oil and diesel fuel, are likely to fall by 2.6 million barrels, according to a Dow Jones Newswires survey of analysts. A winter storm that pounded the U.S. Midwest and Northeast earlier this week, dropping as much as two feet of snow in some areas, likely pushed up demand, traders say.
Gasoline stockpiles, meanwhile, are seen declining by 1.6 million barrels, while crude oil inventories are expected to rise by 1.2 million barrels. Regular maintenance shutdowns and some recent operational snags at refineries likely will push the gasoline stock declines, traders say.
Valero Energy said Tuesday it expects to restart its McKee refinery in Sunray, Texas, in early April at about half of the plant's total capacity. The refinery was shut and evacuated following a fire in a propane deasphalting unit on Feb. 16.
Also buoying oil prices are continued tensions between Western powers and Iran, OPEC's No. 2 supplier.
Traders' early-morning jitters revolved around the weakening Chinese stock market, which led to worries about possibly declining oil demand.
Chinese stocks dropped nearly 9% on Tuesday on speculation that China's government may take steps to slow its rapidly expanding growth by hiking interest rates or taking other steps to reduce money available for borrowing.
That stoked memories of the Asian financial crisis in the late '90s, said Alaron Trading's Phil Flynn. But traders later "realized that the fears were probably a little overdone."
Heating oil futures rose 2.31 cents to $1.7793 a gallon on the Nymex, while April natural gas fell 17 cents to $7.533 per 1,000 cubic feet.