Oil futures flipped to losses late Monday morning on expectations that a global glut of crude could keep growing.
Prices had bounced higher earlier in the day after an Libyan oil terminal fire destroyed 800,000 barrels of crude. The fire raised questions about the expanding conflict in Libya, where unexpectedly robust production has played a central role in global supplies exceeding demand.
But firefighters have now put down blazes at two of the five burning terminals, according to Sirte Oil Co., a state oil company, and Waha Oil Co., which controls the port. While the country's output is down to 230,000 barrels a day, the production outage could be limited in scope, with only a marginal impact on world-wide oversupply, analysts have said.
Genscape, an energy data service, is also projecting another multimillion-barrel addition to U.S. crude stockpiles, said Peter Donovan, broker for Liquidity Energy in New York. The U.S. Energy Information Administration will release the stockpile data Wednesday morning. With trading light, an overarching belief that supply will keep outpacing demand has been the biggest factor in goading the market into retreat Monday, Mr. Donovan said.
"The bearish signals continue, and we don't see a reason for it to rally substantially at this point," he said.
Light, sweet crude for February delivery was recently up 7 cents, or 0.1%, at $54.80 a barrel on the New York Mercantile Exchange. It dipped into losses around 11:30 a.m. ET after rising as high as $55.74 a barrel earlier in the morning.
Brent crude for February delivery recently traded down 13 cents, or 0.2%, to $59.32 a barrel on the ICE Futures Europe exchange. It had traded as high as $60.43 a barrel earlier in the morning.
Libya's oil production recovery after a civil war has been one of the main reasons for a growing glut that is crashing the global oil market, halving prices since mid-June.
Monday's fire added to the fear of renewed turbulence in the country that started earlier in December. Libya declared force majeure on two key oil ports on Dec. 14 as armed clashes between Islamist militias and the government disrupted about half of the country's crude-export capacity.
"Geopolitical disruptions always worry the market and Libya is a member of OPEC," said Naaem Aslam, chief market analyst at Avatrade. "So today's rally is a nervous, jittery move after the recent selloff."
Both the Brent and WTI oil benchmarks have fallen for five consecutive weeks. Last week, WTI lost 4.2% and Brent crude was down by 3.1% as a surge in U.S. supplies weighed on the market.
Prices have been largely flat since Dec. 16, the market's most stable period in about a month. Data last week showing economic growth in the U.S. and increased oil consumption in China have sparked some hope that demand is starting to respond to lower prices. The Libyan conflict has also helped.
"What we really need is demand," said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. "I just don't see what the catalyst is going to be."
January reformulated gasoline blendstock, or RBOB, recently fell 1.4 cents, or 0.9%, to $1.4947 a gallon.
January diesel recently flipped to losses, falling 1.43 cents, or 0.8%, to $1.8936 a gallon.
Georgi Kantchev, Benoît Faucon and Eric Yep contributed to this article.
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