Oil fell towards $58 a barrel today, reversing some of the previous session's near 3 per cent gains, as investors took profit amid warnings that any global recovery will only be gradual.
Oil rose more than 3 per cent on Friday to touch a near six-month high as economic data showed fewer-than-expected jobs were lost in April and stress test results lifted some uncertainty over the health of major American banks.
US crude fell 47 cents to $58.16 a barrel by 6.33am. The contract rose $1.92 to settle at $58.63 on Friday.
London Brent crude fell 31 cents to $57.83.
"Oil prices are driven by perceptions that the economic outlook is less pessimistic that previously thought. But the growth numbers we could be seeing from developed economies may not justify such price levels," said David Moore, a commodities strategist at Commonwealth Bank of Australia.
Still, encouraging news from China, the world's third-largest economy, helped support oil at above $58 a barrel.
A top China central banker said the government's stimulus plan has worked better than expected, while crude imports data showed a spike in demand.
China, for the years the world's factory floor, plays a big part in the recovery scenario with many economies in Asia relying on Chinese demand and markets scrutinising Beijing's data for any signs of global demand bottoming out.
Oil, which has plummeted from a record of over $147 a barrel in July, has risen over the past three months on hopes that the economic recession may be easing.
A strong rally in equities markets, which saw the Nasdaq cap its longest stretch of weekly gains in a decade on Friday, has also helped oil prices gain over 14 per cent so far this month and 10 per cent last week.
The US economy is expected to begin growing in the second half of this year, while the jobless rate is expected to peak in the first quarter of 2010, according to a survey of top forecasters released yesterday.
US employers cut 539,000 jobs last month, the fewest since October, signalling the economy's steep decline might be easing and giving the stock market a boost.