Oil prices fell below $97; a day after disappointing European economic figures highlighted the region's parlous growth outlook.
By early afternoon in Europe, benchmark oil for March delivery was down 74 cents to $96.57 a barrel in electronic trading on the New York Mercantile Exchange.
The contract rose 30 cents to finish at $97.31 per barrel on the Nymex yesterday.
Yesterday figures showed economic output in Germany, Europe's biggest economy, contracted by more than anticipated in the last three months of 2012. And France, Europe's second-biggest economy, also saw output drop.
As a result, the recession across the 17 European Union countries that use the euro deepened during the quarter.
Caroline Bain, commodities analyst at the Economist Intelligence Unit, said the combined economy of the euro nations is likely to contract again this year and oil consumption in the region will also fall.
However, oil prices could move higher this year as a result of modest growth in China and an upswing in US oil consumption after two years of contraction, Ms Bain said.
"Although there are still concerns about the dampening impact of fiscal policy in the US, it is our view that steadily improving labour market and housing data will lead to higher US consumer confidence which is positive for oil consumption," Ms Bain said in a written commentary.
Some analysts expect the leading European economies to start turning a corner soon.
"Better sentiment indicators next week are already likely to confirm that the economic situation is improving," analysts at Commerzbank in Frankfurt said in a report. "Tighter OPEC supply coupled with a brightening economic situation is likely to spark further price rises."
Brent crude, which is used to price oil that many US refineries buy to make gasoline, was down 41 cents to $117.59 per barrel in London.
