Oil rose towards $83 today, along with a relief rally in broader markets, after global financial authorities agreed to save Ireland and protect Europe's wider financial stability.
US crude oil futures for January delivery rose 72 cents to $82.70 a barrel by 1003 GMT after the expired December contract last week marked its largest weekly percentage decline since the week to August 13th.
ICE Brent crude futures were outperforming US crude, also reflecting the optimism in the euro zone. The North Sea benchmark was up $1.02 at $85.36.
The European Union and International Monetary Fund agreed yesterday to help bail out Ireland with loans to tackle its banking and budget crisis after the country formally requested aid. The deal is expected to total €80 billion to €90 billion.
"For this week, it will be important to see if the rescue plan can stop a chain of risk that may spread into other euro zone countries facing financial deterioration," Mizuho Corporate Bank said in its daily commodities research note.
The euro rose to a one-week high against the dollar, hitting $1.3786.
A weaker dollar typically supports oil and commodities prices, boosting investors' appetite for riskier assets, and because it makes oil cheaper for consumers outside the United States.
European and most Asian shares rose, outweighing the effect of Chinese moves to tighten monetary policies to fight inflation.
Mizuho Corporate Bank cautioned, however, that a further tightening by China might follow last week's increases in bank reserve requirements. "There are also views that the bank reserve hikes, which China has introduced recently, are not enough to curb inflation," the bank said.
China is the world's top energy consumer and any slowdown in its economy may curb oil demand.
Fredreic Lasserre, global research head for commodities at Societe Generale, said oil inventories in the United States have fallen to the levels below those of a year ago and the supply overhang was becoming thinner than before.
Fuel inventories in China also fell in October, dropping for eight months in a row.
Mr Lasserre said that he expected inventories to fall to 55 days and the market to be in backwardation by the third quarter of next year and that commodities remain a good hedge against long-term inflation.
Elderly King Abdullah of Saudi Arabia, the world's top oil exporter, heads to the United States on Monday for medical checks for a back ailment, and Crown Prince Sultan is returning from holiday abroad, state media said yesterday.
The market reaction to concerns about the Saudi ruler's health has so far been limited.
Reuters