Crude futures shook off another sharp drop early Friday morning and recovered to settle just slightly lower, ending a week that erased 9% off the price of a barrel of oil.
Nymex crude fell to its lowest level in six weeks early--$77.55 a barrel--in the session before snapping back, but still settled below the psychologically important $80-a-barrel level. Light, sweet crude for November delivery settled down 66 cents, or 0.82%, at $79.85 on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange settled $1.52 lower, or 1.44%, to $103.97 a barrel.
Oil largely tracked equities and the dollar, strengthening as the stock market recovered and the dollar weakened. A weak dollar makes oil more expensive, as the dollar-denominated commodity makes it more costly for holders of other currencies.
Traders and analysts said the day's selloff and recovery were likely evidence of a cycle of long positions being liquidated followed by short positions being covered. Also bolstering the market were bargain hunters taking advantage of an oversold market and traders shoring up their books as they head into the weekend.
Andy Lipow, the president of research firm Lipow Oil Associates, said the down-and-up movement in the market also reflected a tension between optimism that European debt problems could be resolved--and continued worries about the global outlook.
"That's the conflict you see in the market today," Lipow said. However, he said: "The feeling pervading the market is that the world might be headed into a recession, which would dampen oil demand."
Market watchers are largely pessimistic of oil's prospects heading into next week. With continued fears over euro-zone sovereign debt problems and doubts about U.S. and global economic growth, they see limited possible upside, but plenty of room for another selloff.
"The sentiment is still kind of negative, no doubt," said Tom Bentz, the director of BNP Paribas Commodity Futures Inc. "Right now it's all about fear...Sometimes the perception is worse than reality, but at this point there's no way of knowing."
Brian LaRose, a technical analyst at United-ICAP, said it will all come down to what equities and the dollar do in the coming days. He added that if oil fails to hold above $80 a barrel--it could continue to slide to $75 or even $65.
"We need to see evidence of bottoming action" in the market, LaRose said. "Yes it's oversold" he said of the market, "but not enough for a sustainable rally from here."
Front-month October reformulated gasoline blendstock, or RBOB, lost 0.53 cent, or 0.2%, to $2.5547 a gallon. October heating oil was down 5.27 cents, or 1.85%, to $2.7958 a gallon.