Crude experienced wide swings on Tuesday, sinking as low as $81 a barrel, a new eight-month low. Prices bounced back later in the day and finished moderately higher at $83.34.
Over the last year, oil prices have fluctuated between $74.95 and $110.55 - with more volatility expected.
Oil's recent wide price swings highlight the market's uncertainty over changes in global supply and demand.
"Oil has given up the ghost, the overriding concern is for global demand to moderate or even come off quite a bit in Europe, the United States and even China and India," David Morrison at GFT Global told Reuters.
Oil Prices and the OPEC Summit
Weighing on crude oil prices this week were words Monday from Saudi Arabia's oil minister as he arrived in Vienna for Thursday's OPEC summit.
The Saudi minister remarked that OPEC production quotas may be too low. The suggestion could move OPEC members such as Iran and Venezuela to shy away from a production cut.
In a research note Tuesday, analysts at energy focused investment bank Simmons and Company wrote, "This position is an indication that Saudi is not overly concerned about the recent pullback in oil prices. It is not yet anxious to aggressively cut supply."
As a matter of fact, Saudi Arabia has actually been increasing its oil supply over the last few months in an effort to pick up the slack from Iran's declining output, which experienced a slump in exports on the heels of tightening U.S. sanctions.
Iran is the No. 2 oil producer in OPEC's exporting countries, earning more than half of government revenue from oil sales, according to the International Monetary Fund (IMF). Its oil output has slipped more than 40% this year, the International Energy Agency (IEA) reported Wednesday.
The IEA report could influence OPEC's decision on production quotas. At OPEC's last meeting in December the members decided to maintain actual output at 30 million barrels per day.
Iran Sanctions Approaching
Also influencing oil prices was a report from the Obama administration on Monday that noted seven countries, including India and South Korea (sizable importers of Iranian crude), have sufficiently reduced their oil imports from Iran and will not be subject to sanctions from the U.S., set to take effect at the end of June.
"By reducing Iran's oil sales, we are sending a decisive message to Iran's leaders: until they take concrete actions to satisfy the concerns of the international community, they will continue to face increasing isolation and pressure," U.S. Secretary of State Hillary Clinton said in a statement Monday.
Oil prices have slipped as markets expect the U.S. exemptions will prevent major supply disruptions.
China, the leading Iranian crude importer in the first half of last year, has not yet been granted an exemption. U.S. officials said talks were ongoing and that status could change before the June 28 deadline to impose sanctions.
Talks over Iran's nuclear programs will restart this weekend in Moscow. It'll likely be the final round of discussion before the sanctions and before a ban on importing Iranian oil into Europe is set in motion.
Eurozone Fears Increase
Finally, Europe's financial wretchedness remains a main driver of oil prices.
Crude prices plummeted Monday following the ambiguity of the proposed Spain bailout package that appears to be nothing more than a Band-Aid. With Greece's crucial elections on Sunday and fresh reports that Italy may be the next Eurozone country to falter, investor fears remain elevated.
"The measures [to prop up Spain] once again postpone the inevitable dissolution of the EU," Mike Fitzpatrick, editor-in-chief of Kilduff Report's Energy Overview, wrote in a note Tuesday. "There is more downside coming."
Market participants dread a deteriorating recession in Europe will put the brakes on demand for oil and cause prices to tumble anew.
The geopolitical and global financial uncertainty looming has oil markets jittery. The result has been an increasing wide range of oil price predictions, although the long-term look remains bullish.
In a research note on Monday, GS analysts wrote, "We continue to expect policymakers will be able to contain the European debt crisis. Further, as tension between Iran and the West escalate, the risk to crude oil prices is becoming increasingly skewed to the upside."
As of noon Wednesday oil prices were up slightly to $83.55.