CME CME Group Inc

By Nicole Friedman 

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

The U.S. benchmark had fallen as low as $40.06 a barrel on the New York Mercantile Exchange in intraday trading before rebounding. Prices settled up $1, or 2.5%, to $41.74 a barrel.

Analysts cautioned that the rally could be short-lived and attributed the price gains to traders who had bet on lower prices closing out those positions. 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.

Both benchmarks slid to three-month lows Friday on concerns about large global inventories. U.S. prices last fell below $40 a barrel in August amid broad concerns about the pace of Chinese economic growth. Before that, the $40 level was last broached in 2009.

"As we approach these six-year lows, you'll see more...bottom pickers coming out," said Gene McGillian, senior analyst at Tradition Energy. With prices near $40, he said, "we're going to find out whether there is enough conviction on the part of sellers" to bet that the market can go even lower.

Brent, the global benchmark, settled up 9 cents, or 0.2%, at $44.56 a barrel on ICE Futures Europe.

Gasoline futures fell 0.03 cent to $1.2386 a gallon, the lowest settlement since February 2009. Motor club AAA said Monday that it expects U.S. drivers to see average retail gasoline prices below $2 a gallon by Christmas, down from $2.16 a gallon currently.

Oil prices wavered throughout the session as traders weighed the persistent global glut of crude against concerns about violence in the Middle East.

Though the Paris attacks fueled worries that unrest in the Middle East could interrupt oil production in the region, they also raised concerns about weaker fuel demand in Europe due to reduced tourism.

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 oil and refined products held by developed nations reached nearly 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.

"The IEA reporting [developed nations'] inventories being at a record-high level certainly should get people's attention," said Dominick Chirichella, analyst at the Energy Management Institute. "I think there's more to go to the downside."

Data provider Genscape Inc. said Monday that crude-oil supplies in the 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.

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.

Diesel futures rose 0.38 cent, or 0.3%, to $1.3851 a gallon.

Summer Said contributed to this article.

Write to Nicole Friedman at nicole.friedman@wsj.com

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(END) Dow Jones Newswires

November 16, 2015 16:06 ET (21:06 GMT)

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