Jitters over the future of the global economy sent the oil price swinging down to multi-month lows and bouncing back up again just as quickly yesterday, ahead of a much-anticipated economic policy statement from the US Federal Reserve.
After opening at around $103 per barrel, Brent crude tumbled below $100 for the first time since early February and then jumped above $105 in late-afternoon trading.
Meanwhile, West Texas Intermediate – the main New York contract – slumped to a shade about $75, itslowest level since September, and then rallied to a high of $83.05.
The see-sawing oil price followed a similar trajectory to global equity markets, which finally settled to a nervous calm in the afternoon after the turmoil in response to the downgrading of the US credit rating and the continuing uncertainty over the sovereign debt crisis in the eurozone.
Fears that the global economicrecovery is stuttering were further stoked by reports of Chinese inflation running at 6.5 per cent in July, raising the spectre of monetary tightening in one of the world's fastest-growing economies.
The oil price bounced back in theafternoon as traders looked forward to a boost to the US economy from Federal Reserve chairman Ben Bernanke after yesterday's meeting of the central bank's Federal Open Market Committee.
But even with the recovery in prices, oil is still some $20 down from its 2011 peak. Brent crude hit $126.65 in early April as global growth boomed, the Arab Spring worried markets, and uprisings turned off production in Libya
In Britain, the biggest impact was to send petrol prices soaring to an all-time high of 143.04p per litre in early May.
Oil was rising so sharply that in June Saudi Arabia mooted plans to ease soaring prices by increasing output by the 12-strong Opec produders' cartel, of which it is the leading member.
However, the move was roundlyrejected by a number of Opec members including Iran and Venezuela. And such opposition now looks increasingly justified.