Reversal of fortune: Oil prices tumble after Monday's rapid rise

It's been another crazy set of days, with roller-coaster-like volatility on the global oil market.

After a spike on Monday, when oil prices rose in a manner not seen since the 1990 Gulf War, those prices fell more than seven percent on Tuesday, as the western markets took another steep plunge and investors worried over new, weak economic data out of China.

As of Tuesday afternoon, the benchmark Brent crude was reportedly down $4.10, and standing at $50.05 per barrel. At the same time West Texas Intermediate, another important gauge for overall oil prices, was down more than seven percent to around $45.60 a barrel.

What a difference a day makes, especially when you consider crude prices were soaring on Monday; thanks in part the Energy Information Administration's (EIA) downward revision of U.S. crude oil production data.

Also on Monday, the Organization of Petroleum Exporting Countries (OPEC) announced it was "ready to talk" to non-OPEC producers about helping the global oil market "achieve equilibrium" by possibly reducing overall production levels.

But one analyst says more than a year of falling oil prices has its own momentum.

"Even with the EIA revision, we're still producing over nine million barrels per day," Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut, told Reuters.

And as for OPEC putting out feelers, Andy Lipow of Houston-based Lipow Oil Associates notes Saudi Arabia has made no signs of being willing to cut back on its production levels, despite the dramatic drop in crude prices.

"There still remains a significant amount of discord within OPEC itself in order to come up with a way to reduce production and increase prices," he said in an interview with the Houston Chronicle's Fuel Fix web site.

Other industry analysts, meanwhile, say speculators are behind the oil market's current split personality.

"The seesaw in prices is a reminder how detached price movements are from the fundamentals," Nick Cunningham wrote this past weekend over at OilPrice.com.

"Prices do rise and fall based off of some vague notion of what's going on in the physical market," he continued. "For example, if it appears that supply is exceeding demand, oil prices will drop. But they could drop way beyond what is justified, as traders push prices lower. Then, once speculators realize the market has oversold, prices whipsaw back in the other direction, even if the surplus in the physical market remains."