CME CME Group Inc

By Nicole Friedman And Georgi Kantchev 

NEW YORK--U.S. oil prices rose Monday, erasing earlier losses, after nearing the psychologically key $40-a-barrel level.

The U.S. benchmark fell as low as $40.06 a barrel on the New York Mercantile Exchange in intraday trading before rebounding. Prices recently rose 56 cents, or 1.4%, to $41.30 a barrel.

Analysts attributed the reversal to technical trading after prices approached $40 a barrel, a level last reached in August amid broad concerns about the pace of Chinese economic growth. Market participants hold more than 20,000 December put-option contracts at $40, according to CME Group Inc., which give traders the right to sell a Nymex futures contract if the price falls to that level. The December options contract expires Tuesday, and traders could be closing out those positions ahead of expiration.

Brent, the global benchmark, recently traded down 35 cents, or 0.8%, to $44.12 a barrel on ICE Futures Europe.

Prices wavered Monday as traders weighed the persistent global glut of crude against concerns about violence in the Middle East.

France escalated its air campaign against Islamic State following the Paris terror attacks, increasing market jitters about the Middle East, the world's most prolific oil-producing region.

However, ample production of crude oil around the world and a huge overhang of supplies limited price gains. The International Energy Agency said Friday that commercial stockpiles of crude held by developed nations reached near three billion barrels at the end of September, a record high and enough to meet global demand for about 64 days.

Governments of developed nations including the U.S. hold an additional 34 days' worth of supply, the IEA said. Stockpiles of gasoline and other refined products also are high.

Data provider Genscape Inc. said Monday that crude-oil supplies in the key storage hub of Cushing, Okla., rose by more than a million barrels in the week ended Friday, according to a broker who had viewed the data.

Both benchmarks slid to three-month lows Friday on concerns about large global inventories.

"It would seem that the oil markets are more concerned with the fundamentals of oil rather than the short-term impacts of heightened political tensions," said Daniel Ang, an analyst with Phillip Futures.

On Friday, Baker Hughes Inc. reported that the U.S. oil-rig count rose by two to 574, the first increase in 11 weeks. The number of rigs drilling for oil, which is viewed as a proxy for activity in the oil industry, has fallen sharply since oil prices started falling last year.

Despite that fall, the U.S. continues to pump more crude than last year, at around 9.2 million barrels a day. Other big oil suppliers, like Saudi Arabia and Russia, have ramped up their crude output in a bid to secure market share.

The average price of crude sold by members of the Organization of the Petroleum Exporting Countries fell to $39.21 a barrel on Friday, below $40 a barrel for the first time since 2009, the organization said Monday.

Gasoline futures recently fell 0.7% to $1.23 a gallon. Diesel futures fell 0.2% to $1.3785 a gallon.

Summer Said contributed to this article.

Write to Nicole Friedman at nicole.friedman@wsj.com and Georgi Kantchev at georgi.kantchev@wsj.com

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(END) Dow Jones Newswires

November 16, 2015 13:48 ET (18:48 GMT)

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