While a combination of a weaker dollar and predictions of a drop in domestic crude inventories pushed prices up by more than US$2 a barrel at times yesterday, that advance came a day after prices fell more than US$2 on concerns about economic growth and demand.

Analysts say the volatility reflects a battle between investors who believe the economy is cooling and that oil is overvalued, and those who see oil as a safe haven in an unsettled financial environment.

"Wide price swings are expected going forward," said Jim Ritterbusch, president of Ritterbusch and Associates of Galena, Illinois, in a research note.

Light, sweet crude for February delivery rose US$1.24 to settle at US$96.33 a barrel yesterday on the New York Mercantile Exchange.

Analysts said reports that Nigerian militants are planning attacks on the nation's oil facilities were also sending prices higher, and they noted that rebel groups have already succeeded in disrupting exports from Africa's largest oil producing nation.

A monthly Energy Information Administration report predicted oil supplies will be tight this year but ease in 2009. The EIA slightly raised global oil consumption growth forecasts and said prices will average US$87 this year, up from a previous estimate of US$85, before falling to average US$82 a barrel in 2009. OPEC will likely supply nearly a million more barrels of oil per day this year than previously expected, the EIA said.

The EIA cut US oil and gasoline consumption forecasts for 2008. It also said retail heating oil prices this winter will be 33.5 percent higher than last year, an increase from last month's prediction of 30 percent.