Oil gave up early gains on Tuesday as a strong dollar weighed on prices, despite predictions from the producer cartel Opec that prices had reached their lowest point.
Head of the Organisation of the Petroleum Exporting Countries Abdullah al-Badri said oil prices may have bottomed out and warned that a reduction in investment in the industry would lead to a major price jump in the future, possibly to as much as $200 a barrel.
"If we cut production then there will be spare capacity and producers will not invest, or postpone projects. The market will rebound back higher than the $147 we saw in 2008," Badri warned on Monday in an interview with the Telegraph newspaper.
Crude oil prices initially jumped on the back of Badri's comments but sank soon after. Brent was trading at $48 a barrel at 1000 GMT while US WTI Crude had reached $45.08 at the same time.
Oil prices slipped as the dollar index strengthened, making the dollar-denominated crude oil more expensive in other currencies.
Crude oil prices have fallen by 59% since last summer, amid an escalating supply glut as US shale oil producers ramped up production.
The Opec cartel, led by the world's top producer Saudi Arabia, has elected to maintain production levels despite falling prices, in a bid to maintain market share.
The decision is starting to impact on non-Opec producers, according to Standard Chartered bank.
"Non-Opec output is being hit hard, and we now expect the oil market to tip into supply deficit in H2," the bank said.
Opec is not due to meet to discuss production targets until the summer.