Updated from 1:05 p.m. EDT
The April crude oil contract fell sharply in late afternoon trading at the New York Mercantile Exchange, reversing a slow advance from the morning session.
After sneaking above $58 per barrel, crude plummeted nearly $2 in the last hour of trading at the Nymex before ultimately settling at $57.11. Reformulated gasoline climbed 2 cents to $1.90 a gallon, and heating oil remained unchanged at $1.69 a gallon.
The near-term contract for natural gas closed down 4 cents at $6.92 per million British thermal units.
Responsible for the sudden downturn were risk-averse traders who were closing their positions ahead of next Tuesday's expiration of the April West Texas Intermediate contract, according to Tim Evans, energy analyst at Citigroup Global Markets.
The May crude contract closed the session near $59.50. It will likely fall near the same price level as the April contract before the latter's expiration, Evans said. "In this situation, the classic investor catchphrase that you should never try to catch a falling knife certainly applies," he said.
Before crude oil's late-afternoon reversal, the April contract was being led higher by rising gasoline prices. News that a small fire broke out at
Carson, Calif., refinery also lifted crude prices. BP later reported that the fire was extinguished in six minutes and wouldn't affect refinery output.
Although crude prices could remain volatile, they probably won't fall below $55, according to Larry Levin, energy analyst at Secrets of Traders in Chicago. "There are a ton of buy orders at $55, so that is probably the bottom of its trading range in the near term," he said.
Meanwhile, major energy stocks were weaker.
was down 1.2%, and
Elsewhere, A.G. Edwards downgraded the shares of E&P firm
to hold from buy. Breitburn dropped 1.1% to $31.34.