LONDON, Jan 2: Crude oil prices rebounded strongly on Friday in volatile trade, after earlier losing about $2.5 on profit-taking, as traders fretted over ongoing unrest in the key oil-producing Middle East.

New York’s main contract, light sweet crude for delivery in February, jumped $1.45 to $46.05 a barrel, after spiking $5.57 on Wednesday on the New York Mercantile Exchange. Markets were closed on Thursday.

In late London trade, Brent North Sea crude for February was up $1.30 at $46.89 per barrel after gains of $5.55 on Wednesday.

“Oil has continued to rise on supply disruption fears due to the conflict in the Middle East,” said CMC Markets dealer James Hughes.

In earlier trading on Friday, prices had dropped by around 2.5 dollars as traders thought “that the rally was overdone on Wednesday,” said Platts analyst Dave Ernsberger.

He said prices would remain at current levels until US president-elect Barack Obama takes office on Jan 20 when his policies on the US economy, key oil producer Iran and the Israeli-Hamas conflict in the oil-rich Middle East will come to the fore for the market.

The market experienced a tumultuous 2008, soaring to record highs above $147 a barrel in July before a sharp global economic downturn slashed demand for energy and pulled prices sharply lower.

Prices began this week with sharp gains as the Israeli-Hamas conflict in Gaza stoked tensions in the Middle East.

Analysts said the market had also been supported by evidence that the Opec was cutting output in line with an announcement earlier this month. Previous Opec cuts have often been met with only partial compliance.

Crude oil started 2008 by vaulting above $100 for the first time as traders worried about violence in oil exporter Nigeria and supply problems in the key US energy market.—AFP