Oil sets record near $128; pump price at high, too

"So there was a lot of confusion yesterday, and not surprisingly, there was this wild, seesaw session," Shum said.

Options let investors bet oil prices will rise or fall in the future, and prices can fluctuate widely on days when options expire.

Shum said oil is still seen as a better bet than investors' other options.

"Oil as a class has performed better this year than equities and bonds, and continues to encourage investors to pile money into oil and stay in oil," Shum said.

On Thursday, the U.S. Energy Department reported that natural gas inventories rose 93 billion cubic feet last week, more than analysts had expected, and that pulled the whole petroleum energy complex lower.

Fluctuations in the dollar have contributed as well to oil's volatility. The dollar has generally been stronger than earlier in the year, but it is waffling between 104 and 105 against the yen, while the euro seems to be range-bound between $1.54 and $1.55.