LONDON - Brent crude hit a fresh five-year low close to $60 a barrel on Monday after oil producer group OPEC restated its determination not to cut output despite a global fuel glut, but the North Sea benchmark later rallied to trade around $63.
Market momentum appeared to be downwards, with analysts saying oil could plumb new depths before a sustained recovery.
Oil prices have collapsed over the last six months as high-quality, light crude from North America has overwhelmed demand at a time of lacklustre global economic growth.
The Organization of the Petroleum Exporting Countries has kept production steady, worried that any reduction in its output would have little impact on price and instead mean surrendering market share.
"The decision has been made. Things will be left as is," OPEC Secretary-General Abdullah al-Badri told a conference in Dubai on Sunday. "We agreed that it is important to continue with production (at current levels) for the ... coming period."
Analysts said further oil price falls were possible.
"Oil prices may move below $60 per barrel in the near term," analysts at Barclays Bank said, but added that "this (level) is not sustainable in the long run".
Barclays said it expected Brent to average $67 per barrel in the first half of 2015 and $78 in the second half of next year.
Brent for January fell to a low of $60.28 a barrel in Asian trade on Monday, down $1.57 and its lowest since July 2009. The futures contract then rallied sharply to trade around $62.95 by 0910 GMT, up $1.10.
U.S. crude for January was trading at $58.50 a barrel, up 69 cents, after hitting a low of $56.25 earlier in the day - its lowest since May 2009.
"The market may just have moved down too far too quickly today," said Tamas Varga, energy analyst at London brokerage PVM Oil Associates. "It was a bit overdone and people may be 'bottom-picking'."
Analysts have cut oil price forecasts sharply over the last few weeks.
National Australia Bank said on Monday it had lowered its Brent forecast to an average $80 in the fourth quarter of 2014, $75 in the first quarter of 2015 and an average of $80 for all of next year.
"Softer global demand, coupled with unprecedented growth in supply are weighing on global oil indices, with prices falling to levels not seen since the global financial crisis," National Australia Bank said in a report to clients.