Light, sweet crude for February delivery rose 92 cents to $42.59 a barrel on the New York Mercantile Exchange. The contract overnight fell $2.94 to settle at $41.67.
The January contract, which expires Friday, fell 82 cents to $35.40, but fell as low as $33.44, a price last seen more than four years ago.
Analysts are largely discounting the January price, with the volume of the next month contract trading at 13 times the volume. Yet analyst Jim Ritterbusch said pre-expiration lows do provide a downside target to the next contract.
Ritterbusch, president of energy consultancy Ritterbusch and Associates, said the market is sending strong signals that an oversupplied market will remain in place for some time.
"I think it's going to work its way down to today's lows in the January futures," he said.
In London, February Brent crude rose 18 cents to $43.54 barrel on the ICE.
The extreme volatility in energy markets this year, which have seen crude pushed from $100 to $150 between January and July, and back down to $33 this month, has become an urgent global issue.
At an energy summit Friday on London, British Prime Minister Gordon Brown warned that a failure to stabilize oil prices could cost the global economy trillions.
"Wild fluctuations in market prices harm nations all round the world," Brown said. "They damage consumers and producers alike."
OPEC Secretary-General Abdullah El-Badri acknowledged the problem.
"We all know that extreme oil prices whether too high or too low are as bad for producers as they are for consumers," El-Badri said.
Meanwhile, Zeljko Bogetic, the World Bank's chief economist in Russia, told investors that the oil-rich nation would come under crippling financial pressure and may need to take out loans if crude prices do not rebound.
"If oil prices in 2009 and 2010 average $30 a barrel, that would be a nightmare scenario for a global economy," Bogetic said.
Russia, which has used oil profits during the past eight years to pay down most of its foreign debt and build up a vast stockpile of international reserves, could turn from creditor to borrower if current trends continue.
At $50 a barrel, Russia could drain much of its reserve funds and run budgetary deficits, but would not face a "meltdown" scenario, Bogetic said.
Earlier this week, the 13-nation Organization of Petroleum Exporting Countries slashed its output quota by 2.2 million barrels a day in a bid to bolster prices that have slid about 71 percent since July.
Still, crude prices tumbled amid a bevy of dour economic reports suggesting demand for energy will continued to erode.
Analysts say disciplined compliance by OPEC members is key to market reaction and the stabilization of oil prices in the near future. Some OPEC members have a history of ignoring quotas, allowing oil power house Saudi Arabia to carry most of the burden of production cuts.
"Perception of progress is key to the movement of the oil price in the next few months," KBC Market Services in Britain said in a report.
JP Morgan on Thursday cut its 2009 price target for oil to $43 a barrel from $69.
The national retail average price for a gallon of regular gas rose three-tenths of a penny to $1.673 a gallon overnight, according to auto club AAA, the Oil Price Information Service and Wright Express. That is about 37 cents a gallon below what it was a month ago and more than $2.43 below where it was in July when prices peaked at $4.11 per gallon.
In other Nymex trading, gasoline futures less than a penny to 97.18 cents a gallon. Heating oil gained 2.7 cents to $1.40 a gallon while natural gas for January delivery advanced 9.8 cents to $5.646 per 1,000 cubic feet.