Oil prices touched a 17-month low on Friday amid concerns over slower US economic growth, but stabilised later.
Oil prices have retreated from a peak of $78 in July
US light, sweet crude settled down 45 cents to $55.81 a barrel in New York, while Brent crude gained ground up 45 cents to $58.99.
Analysts said that supply concerns had eased, while the mild Autumn had cut usage and a cold US winter looked less likely to materialise.
Oil prices have fallen from highs of more than $78 a barrel in mid-July.
US crude had earlier hit $54.86, its lowest point since last June 2005.
This came on the back of Thursday's price plunge, when the cost of oil fell by more than 4%, or $2.
Some analysts said that the low price of oil would influence the producers cartel Opec at their meeting in Nigeria next month.
"This is going to put pressure on Opec to perhaps make bigger cuts," said Tom Bentz, of BNP Paribas.
But others argue oil is still over-priced, with more price drops to come.
"There is rising concern that we could be going into a US economic slowdown," said senior oil analyst at consultancy ESAI, Rick Mueller.
"This fall also speaks of a well-supplied crude market and a warmer outlook in the US. With those conditions, maybe the market is starting to wake up to the fact that prices shouldn't be near $60."
A trading technicality, as contracts which expire in December were cast aside, may also have helped to trigger the sharp falls of the past two days.
Recent production cuts by Opec members, allied to slowing demand for oil in the US, have dampened market sentiment.
The record highs of July came against the backdrop of the conflict in Lebanon.
Some analysts feel that there is enough geopolitical instability in oil-producing nations such as Iran and Nigeria for prices to rise again soon.
But the director of commodity strategy at Societe Generale, Michael Guido, said that traders were reacting less to news events such as kidnappings of oil workers in Nigeria and the possible imposition of sanctions on Iran.
"Too much money has been lost on what-if scenarios," he said.