CORRECTED - U.S. oil bounces off low, trade choppy near options expiry

By Barani Krishnan

NEW YORK (Reuters) - (Corrects Tyche Capital Advisors location to Laurel Hollow, not Hollow Way, New York, in 3rd paragraph)

U.S. crude oil futures bounced up off a 5-1/2-year low on Tuesday, and hovered around $55 a barrel in volatile trading near that price, with U.S. options set to expire later in the day.

Global benchmark Brent crude also pared losses after plumbing a July 2009 low below $59, but Brent remained stuck below $60 a barrel as major oil producers said they were in no rush to cut production and curb a growing glut. Front-month January Brent expires later in the day.

"There's a whole lot of things going on, from the options trade in WTI to the position squaring in Brent, that's helping oil prices get some upward traction here," said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow, New York.

Traders also cited crack spreads and other activity as Brent's premium toward U.S. crude narrowed to below $4 from Monday's one-month high of around $5.

U.S. West Texas Intermediate (WTI) futures rose 65 cents to $56.56 a barrel by 11:53 a.m. EST (1653 GMT), having rallied from as low as $53.60 a barrel.

Brent was down $1.31 at $59.75 after plumbing a July 2009 low of $58.50 earlier.

Some oil traders said that options players may be seeking to defend prices around the $55 a barrel mark, hoping to avoid executing options that expire in-the-money. Open interest for January puts at the $55 strike stood at more than 13,500.

"Good open interest on the 55 strike certainly helped," one trader said.

(Additional reporting by Catherine Ngai in New York, Alex Lawler in London and Henning Gloystein in Singapore; Editing by Jason Neely, Michael Urquhart and David Gregorio)