Oil pared losses today after an earlier fall to a new 3-1/2-year low below $48 a barrel, weighed down by heavy losses in global stock markets after confirmation that the United States was in recession.
But a rally in European shares and expectations of a bounce on Wall Street helped oil move up from its lows.
US light crude for January delivery was up 3 cents at $49.25 a barrel by 1pm. It earlier touched a new 3-1/2 year low of $47.36, its lowest since May 2005.
Prices had dropped nearly 10 per cent today. London Brent crude was up 5 cents at $48.02 a barrel after touching a low of $46.02, its lowest since February 2005.
"Today's equity market rebound is preventing oil from going lower," said Olivier Jakob, of consultancy Petromatrix.
"The equity market has been a main input for oil," he said. "Because the slowdown in oil demand is linked to the global economy - that's why the correlation is very strong."
Oil prices had tumbled today after Opec decided to wait until later this month to take more supply off the market to try to defend prices.
"Opec was the key reason for the sell-off at first and then the poor performance on equity markets helped it follow through," said Rob Laughlin, oil analyst at MF Global in London. A key economic research body found today that the United States economy had slipped into recession in December 2007.
The Organization of the Petroleum Exporting Countries is ready to cut production by a significant amount when it meets later this month in Algeria to try to shrink rapidly building stocks, Opec's secretary-general said yesterday.
Reuters