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By Bloomberg

Oil rebounded from the biggest drop in a week amid the most volatile prices in more than three years.

Futures rose as much as 1.1 percent in New York, retracing a 4.7 percent slide on Tuesday. The CBOE Crude Oil Volatility Index climbed to 60.16, the highest level since October 2011. Crude stockpiles in the U.S., the world’s biggest oil consumer, probably expanded by 2.4 million barrels last week, a Bloomberg News survey shows before data from the Energy Information Administration on Jan. 22.

Oil fell almost 50 percent last year, the most since the 2008 financial crisis, as the U.S. pumped crude at the fastest rate in more than three decades and the Organization of Petroleum Exporting Countries resisted calls to reduce supply. BHP Billiton Ltd., the largest overseas investor in U.S. shale, said it will cut the number of active drill rigs in the nation by nearly 40 percent.

“We’re seeing further reports of rigs being withdrawn from active service in the U.S.,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone. “It’s a step in the right direction but incremental at this stage. We need to break up through $50 or down through $45 for West Texas to get the next direction on the market.”

Oil Volatility

West Texas Intermediate for March delivery gained as much as 52 cents to $46.99 a barrel in electronic trading on the New York Mercantile Exchange and was at $46.98 at 1:59 p.m. Singapore time. The February contract expired on Jan. 20 after falling $2.30 to $46.39. The volume of all futures traded was about 24 percent below the 100-day average.

Brent for March settlement climbed as much as 51 cents, or 1.1 percent, to $48.50 a barrel on the London-based ICE Futures Europe exchange. It slid 85 cents to $47.99 on Jan. 20. The European benchmark crude traded at a premium of $1.49 to WTI.

The CBOE Crude Oil Volatility Index measures price fluctuations using options of the U.S. Oil Fund. Volume of the fund, the largest exchange-traded product tracking WTI futures, rose to 50 million shares on Jan. 15, more than double from the end of last year.

Crude Stockpiles

U.S. crude inventories probably increased to 390.2 million barrels in the week ended Jan. 16, according to the median estimate in the Bloomberg survey of eight analysts. Supplies in the prior period were more than 9 percent above the five-year average for this time of year, EIA data show.

The nation produced 9.19 million barrels a day through Jan. 9, the most in weekly records dating back to January 1983, said the Energy Department’s statistical arm. The U.S. oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked shale formations from Texas to North Dakota.

BHP Billiton will reduce the number of operating rigs to 16 from 26 by July, the Melbourne-based company said in a statement. Drillers have cut the number of rigs in service by 209 since Dec. 5, the steepest six-week decline since Baker Hughes Inc. began tracking the data in July 1987.

Current prices should slow U.S. production growth in the second half of 2014 and Canadian output after two years, according to Daniel Yergin, the vice chairman of IHS Inc., a consultant in Englewood, Colorado.

Oil won’t rebound until supply slows as even political tension in the Middle East and Africa remain secondary to the market glut, said the Pulitzer Prize-winning oil historian.

“There’s a surplus of geopolitical risk but there’s an even greater surplus of supply,” he said in an interview on Jan. 20 at the World Economic Forum in Davos, Switzerland. “When the market will make a response in supply, there will be a response in prices.”