Oil prices were down on Monday, but reversed some losses after hitting their lowest since early January on conflicting reports about whether Saudi Arabia and other OPEC oil producers are considering a half-million barrel daily output increase.
Brent crude futures for January fell $1.41, or 1.6%, to $86.21 a barrel. U.S. West Texas Intermediate (WTI) crude futures for December were down $1.69, or 2.1%, at $78.39 ahead of the contract's expiry later on Monday.
Both benchmarks had plunged by more than $5 a barrel earlier in the session after the Wall Street Journal reported an increase of up to 500,000 barrels per day will be considered at the OPEC+ meeting on Dec. 4.
Oil pared some losses following a Saudi state news agency report that the kingdom was not discussing such a boost.
"It's hard to believe they're going into a market that is basically trading in contango," said Bob Yawger, director of energy futures at Mizuho in New York, referring to the effect of current oil futures trading at a discount to later dated contracts. "That's playing with fire."
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, recently cut production targets and de facto leader Saudi Arabia's energy minister was quoted this month as saying the group will remain cautious.
Releasing more oil amid weak Chinese fuel demand and U.S. dollar strength could move the market deeper into contango, encouraging more oil to go into storage and pushing prices still lower, Yawger said.