Oil recouped early losses to resume its march towards the $100-milestone today as resurfacing worries of tight winter supplies and continuing dollar weakness put the brakes on some early profit-taking.
This morning, US crude for December delivery stood 83 cents up at $97.20. London Brent crude was 94 cents up at $94.18 a barrel.
Crude had dropped earlier today on more than $1 amid concerns of weak US oil demand and falling stock markets and reversing some of the gains that had carried it to a peak of $98.62, the latest in a succession of all-time highs.
"(It's a case of) take a step back in order to take a bigger leap forward....The reasons why we got here haven't really changed," noted Harry Tchlinguirian, analyst at BNP Paribas.
Oil prices have surged nearly 40 per cent in under three months as a weaker dollar, robust global petroleum demand and slimmer oil supplies attracted huge speculative investment, but trade has become increasingly volatile as it approaches $100.
"More and more investor money has flowed in to commodities as the dollar has continued to weaken," JP Morgan analysts said in a research note.
"These flows have reinforced the on again-off again negative correlation between oil and the dollar and trading the two markets together is back in vogue."
The dollar hovered close to its all-time lows against the euro today.
World stocks hit a two-week low today, tumbling after the overnight fall in Wall Street on a fresh series of negative news on the US mortgage and financial industry.
Analysts have said oil could climb above $100 a barrel in the coming days amid expectations that stockpiles in major consumer countries will grow tighter this winter, although US government data yesterday tempered those worries slightly.
In the past month, demand for fuel in the United States fell 0.4 percent from a year ago, the US Energy Information Administration said in a weekly report. It also showed crude stocks last week fell by only 800,000 barrels, less than expected, slightly easing concerns over winter supply.
Petrol inventories fell by 800,000 barrels but heating oil stocks rose by 600,000 barrels, the data showed.