The failure by oil-rich nations to agree to a freeze in production sent crude prices lower Monday.
Prices recovered much of their losses by afternoon, and analysts said oil is likely to rise in the longer term as many companies, particularly in the U.S., scale back output.
The effort to limit production to keep up prices failed after Iran stayed away from a weekend meeting of 18 oil-producing nations in Doha, Qatar. Saudi Arabia said it wouldn't back a deal if regional rival Iran, which is trying to increase output as international sanctions are lifted, wasn't involved.
Oil prices fell as much as 7 percent after the talks ended, but they later rebounded. The contract traded in New York was down 58 cents, or 1.4 percent, to $39.78 a barrel Monday. The international standard, Brent crude, fell 19 cents, or 0.4 percent, to $42.91.
While the Doha meeting could have helped set the stage for a smooth recovery in energy markets, the road ahead now promises to be much more bumpy, given the glut of oil in the system. Energy analysts now expect oil markets to take longer to rebalance as production ebbs more slowly and demand eventually catches up.
"The weekend headlines will further support the already high level of price volatility," analysts with Goldman Sachs wrote in a report Monday.
The outcome of the Doha meeting highlighted once again that energy markets -- and particularly oil -- are affected by the rivalry between Saudi Arabia and Iran for leadership and influence in the Middle East.
The Saudi deputy crown prince, Mohammed Bin Salman, said Friday that Saudi Arabia could immediately raise its crude output by more than a million barrels a day.
"I don't suggest that we should produce more, but we can produce more," Salman, who is the country's defense minister and chairman of the Supreme Council of the Saudi Arabian Oil Co., which sets the country's oil policy, said in an interview with Bloomberg News.
Oil prices collapsed over the past year after major producers, led by Saudi Arabia, decided to flood the market to secure a larger market share. Ostensibly, the policy was aimed at pushing high-cost U.S. producers out of the market.
But by producing at higher levels, Saudi Arabia was also hurting other oil producers within OPEC, including Iran, and also Russia, which is not an OPEC member. Both need higher prices to balance their budgets.
The strategy led to a glut in the oil markets that has pushed prices to their lowest levels in years.
The idea of a freeze in production came up in February, as oil fell below $30 a barrel, and initially helped produce a rebound in the market. At the time, Saudi Arabia, Russia, Qatar and Venezuela had agreed in principle on a freeze but made it contingent on participation by other major producers.
After the Doha meeting, officials from oil-producing countries said they would work on a new agreement for the next meeting of the Organization of the Petroleum Exporting Countries, to be held in Vienna in June.
At the same time, lower prices are beginning to bite. Last week, the International Energy Agency said that global oil markets would "move close to balance" in the second half of the year as lower prices hurt producers outside OPEC.
The global oil glut is expected to drop to 200,000 barrels a day in the last six months of the year, from 1.5 million in the first half, the agency said in its monthly oil report released Thursday. The group found that outside OPEC, output will decline by the most since 1992 as the U.S. shale boom falters.
For that reason, the outcome of the Doha meeting was moot, according to a report by HSBC titled "Much a-Doha about nothing."
"The agreement would only have been of symbolic significance, in our view, and would not have altered the supply fundamentals," according to the bank's report. "We continue to see clear evidence that the market rebalancing is drawing near and expect prices to trend higher as the market tightens in the second half of the year."
Fadel Gheit, a senior energy analyst at Oppenheimer & Co., said the recent cuts in investments will help rebalance supply and demand in the longer run, regardless of the short-term disruption caused by the Doha meeting.
"We believe prices will rise regardless of what OPEC does or does not do," Gheit said. "We believe oil prices will rise to a sustainable level closer to $60, the new normal, not $100 and not $40 either."
The response in the markets to the Doha meeting was tempered by news of a strike by oil workers in Kuwait.
"We have two compelling, competing stories in the market," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. "There's the failure to reach an agreement in Doha, which supports an OPEC in disarray narrative, and we have an oil workers strike in Kuwait that's taking a significant amount of supply off the market."
Workers in Kuwait began the strike Sunday to protest cuts in pay and benefits as Middle Eastern crude exporters, reeling from lower oil income, cut subsidies and government handouts. The walkout is the first by oil workers in Kuwait since at least 1996, according to Middle East Economic Digest.
Information for this article was contributed by Pan Pylas of The Associated Press, Jad Mouawad of The New York Times and Mark Shenk of Bloomberg News.
A Section on 04/19/2016