Investors hoping for serenity in the New Year should probably avoid the oil market. Energy analysts say the volatility gripping the sector is likely to continue beyond the holidays.
The oil price moves this week have been spectacular even for a market that has seen the cost of crude spike to nearly four-year highs in early October and lose almost half of its value by late December.
U.S. West Texas Intermediate crude plunged to an 18-month low at $42.53 on Monday, shedding more than $7 a barrel in just five days. On Wednesday, the contract rallied nearly 9 percent to $46.22, posting its best daily performance in more than two years.
By Thursday, U.S. crude was once again deteriorating, slipping 3.5 percent and falling back below $45 a barrel.
To be sure, the wild swings can be explained in part by thin trading during the week of Christmas.
Tamar Essner, director of energy and utilities at Nasdaq Corporate Solutions said "the low liquidity during the holiday week is exaggerating the volatility and causing irrational price action as the market has no confidence about anything now."
However, investors may have to endure the roller coaster ride even after traders return to their desks, according to Dominic Schnider, head of commodity and Asia-Pacific forex at UBS.
"I think the volatility in the short term is here definitely because we need some confirmation" that prices will rise, "and that confirmation ultimately comes from inventory in the U.S. going down further," Schnider told CNBC's "Squawk Box" in Asia.
Stockpiles of crude held in the United States began building up in September. They now sit about 7 percent above the five-year average for inventory levels. Stocks began ticking lower four weeks ago, but the oil market needs to see a stronger downtrend before it rallies, says Schnider.
"Once we get that confirmation somewhere in the first quarter I think the volatility in the oil market should come down, and that's why it's the time to position towards higher prices" he said.