Oil prices fell 1.8 per cent back to below $55 today threatening a repeat of the previous session's rout - sparked by a warm US winter and aggravated by a shift in investment fund money - that took prices to a 19-month low.
Selling gained momentum, sending US crude down $1, after Belarus said a compromise had been found to resume exports of Russian crude to Europe via the Druzhba pipeline following a trade row.
US data due later today is expected to show further builds in heating oil stocks in the world's biggest consumer, possibly steering prices back towards yesterday's $53.88 low.
US crude was 95 cents lower at $54.69 by 12pm, after a closing loss of 45 cents yesterday. The market had recovered that day from a slide of over $2.
London Brent crude was down 80 cents to $54.38.
Prices have been hammered 10 per cent this month by warm weather in the US northeast, the world's top heating oil consumer, as well as by a broad commodity sell-off by investors who fear the market may have passed its peak.
Merrill Lynch analysts estimated "synchronous global warm winter weather" had reduced oil demand in OECD industrialised countries by 300,000 barrels per day in December and was likely to cut back January demand by 600,000 bpd.
"In total, during the first half of the winter, OECD demand could drop by nearly 38 million barrels relative to the seasonal norm," Merrill Lynch said in a research note.
The bank kept its first quarter price forecast for US oil at an average $58, although it acknowledged a warm end-of-winter could create some downside risks.