Oil prices were choppy on Thursday following reports OPEC could extend its oil supply-reduction pact with non-members and might even apply deeper cuts if global crude inventories failed to drop to a targeted level.
Benchmark Brent crude was down 4 cents at $55.71 a barrel by 2:33 p.m. ET (1933 GMT). The contract peaked at $56.24 during the session and bottomed at $55.13
U.S. light crude settled 25 cents, or half a percent, higher at $53.36 a barrel. It traded between $52.68 and $53.59.
U.S. gasoline was down 1.5 percent at 1.5252.
Prices clawed back some of their losses after a mid-morning plunge that spoiled an early rally.
"We were up at first on word OPEC may extend output deal, but there is so much supply in the market that their rhetorical prowess is on the wane," John Kilduff, founding partner at energy hedge fund Again Capital, told CNBC.
OPEC and other exporters including Russia agreed last year to cut output by 1.8 million barrels per day (bpd) to reduce a price-sapping glut. The deal took effect on Jan. 1 and lasts six months.
Most OPEC members appear to be sticking to the deal so far, but it is unclear how much impact the supply reductions are having on world oil inventories, which are close to record highs.
The supply pact could be extended by May if all major producers showed "effective cooperation," Reuters on Thursday quoted an OPEC source as saying.
"There's a good chance and high odds that the group (OPEC) decides that they want to continue this process," Energy Aspects analyst Richard Mallinson said.
Most producers appear to be sticking to the deal so far but it is unclear how much impact the supply reductions are having on world oil inventories that are close to record highs.
U.S. oil inventories have risen sharply in the past six weeks, with crude and U.S. gasoline inventories hitting all-time records last week, the U.S. Energy Department said on Wednesday.
Analysts say that the market is setting up for a possible fall if inventories do not start to decline soon.
"The market's response to yesterday's stats suggests it continues to focus on forward expectations of further rebalance through production cuts and increased demand, but doesn't have any oomph to push higher," said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut.
"But the massive overhang over oil and gasoline inventories continues to put doubts in the minds of the bulls."
The anticipation that OPEC's cuts - and surprisingly high level of adherence to those production reductions - will start to reduce inventories has kept traders heavily invested in futures contracts betting on more gains.
As of last week, non-commercial traders had a net long position of 477,000 U.S. crude contracts, just short of the previous week's level that represented a record long position in oil futures, according to data from the U.S. Commodity Futures Trading Commission.
— CNBC's Tom DiChristopher contributed to this report.