By Barani Krishnan
NEW YORK (Reuters) - World oil prices jumped as much as 6 percent on Wednesday before closing off their peaks as weeks of nearly non-stop selling abruptly halted, and traders said failure to break below key chart support levels meant a long rout may be running out.
The surge came after weekly oil data showed a big build in crude stockpiles at Cushing. When prices failed to make a new low following the bearish data, speculators raced to buy up contracts or take profits on short positions, setting off a frenzy of buying that took on its own momentum.
"I think the market, after its free fall, is looking for any reason to spike up. You're going to see volatility here," said Daniel Flynn, energy analyst at Chicago's Price Futures Group.
The sudden spike on Wednesday caught traders and analysts by surprise, and many speculated on causes ranging from the surge in the value of the oversold Russian rouble to the U.S. decision to resume diplomatic relations with Cuba.
Brent for February delivery settled up $1.17, or 2 percent, at $61.18 a barrel. It rose as much as $3.39, or 5.6 percent, during the session.
Brent's next technical resistance was at $63.50, or 10 cents above its $63.40 peak on Wednesday, one trader said.
U.S. crude's front-month contract settled up 54 cents, or 1 percent, at $56.47 after climbing earlier to $58.98. The market pared gains further after the close, intermittently slipping into negative territory.
The biggest slide in oil prices since the 2008 financial crisis had accelerated after OPEC met in November, when Gulf producers resisted calls to curb output.
The plunge has left market-watchers seeking a bottom, and unable to find one. The latest spike has given buyers looking for a bottom a potential point at which to purchase crude.
It remains to be seen whether the intraday rally biggest in 2-1/2 months is a dead-cat bounce or a definitive turning point after a six-month slide that has halved prices. With OPEC ministers saying this week they are in no hurry to cut output, many see new lows ahead, although the steep drop has opened up some short-term opportunities for chart-based traders.
"It's a recipe for technical buying," said John Saucer of Mobius Risk Group in Houston.
Brent had lost more than 10 percent of its value in the previous five sessions, falling below $60 a barrel but holding well above its next major support of $55.
"And once it gets going it feeds upon itself," Saucer said, referring to a potential break higher on short-covering.
(Additional reporting by Robert Gibbons and Jessica Resnick-Ault in New York, Libby George in London and Seng Li Peng in Singapore; Editing by Alden Bentley and Meredith Mazzilli)