Oil prices fell below $54 a barrel on Tuesday in Asia after surging overnight as investors mulled whether a U.S. government bailout of Citigroup Inc. restores enough confidence to staunch crude's 64 percent slide since July.
Light, sweet crude for January delivery was down 61 cents to $53.89 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore.
The contract overnight rose $4.57 to close at $54.50 after the Treasury Department announced a rescue of banking giant Citigroup. Fears the sprawling financial firm would collapse sent stock markets plunging and the price of oil to a 3-year low near $49 last week.
But some oil market watchers think euphoria over the government lifeline for Citigroup will soon give way to more dismal news about a severe global economic slowdown and trigger a test of the lows that oil hit last week.
"We could see some renewed oil price weakness in the very near term as economic data from the U.S. and Europe is likely to be weak," said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney. "That would keep pressure on the oil price."
Investors are eyeing the Organization of Petroleum Exporting Countries, which accounts for 40 percent of global supply, for signs the group may reduce output quotas at an informal meeting Nov. 29 in Cairo.
Venezuelan Oil Minister Rafael Ramirez said Sunday that OPEC should cut oil production by 1 million barrels per day at the Cairo meeting. OPEC President Chakib Khelil said Monday that if the organization met today, a cut of 1 million barrels would not be enough to support oil prices.
The group, which cut output by 1.5 million barrels a day last month, will hold its next official meeting on Dec. 17.
"My guess is OPEC is looking to cut production by about 1 million barrels a day at the December meeting," Moore said. "If there is compliance with the previous cut, it tightens the oil market up quite a bit.
Investors brushed off OPEC's output cut last month, but lower production should eventually help support higher prices, Moore said.
"By late this year or early next year, as the OPEC cuts start to bite a little more, you might see a modest recovery in oil prices."
In other Nymex trading, gasoline futures rose 0.75 cent to $1.14 a gallon. Heating oil gained 0.69 cent to $1.78 a gallon while natural gas for December delivery was steady at $6.89 per 1,000 cubic feet.
In London, December Brent crude fell 68 cents to $53.25 on the ICE Futures exchange.