SINGAPORE; Brent crude recovered towards $108 on Monday on hopes that China could take new steps to stimulate growth and lift fuel demand at the world's second largest oil user, although concerns about the euro zone crisis capped gains.
China's premier called for additional efforts to support growth on Sunday, while Goldman Sachs said world oil demand is growing despite recent weak economic data. The comments provided a bright spark in global markets, battered in past weeks by fears that Greece's political turmoil could spread to other countries in Europe.
Brent crude rose after falling for the past three sessions, adding 74 cents to $107.88 a barrel by 0319 GMT. Crude on Friday marked its its largest three-week fall since May 2011.
US crude gained 43 cents to $91.91, heading for its first rise in seven sessions.
"We believe that the extent of recent sell-off was largely unwarranted," Goldman Sachs analysts said in a May 18 note, pointing to better oil demand and tighter crude supply.
Implied world oil demand in the past three months was "up more than 1.0 million barrels per day (bpd) over last year" despite concerns about softening economic data, the bank said.
"With Iranian crude oil increasingly shut out of the world oil market, the supply-demand balance in the OECD countries swung back into deficit once again in April, suggesting a return to higher prices will be needed to balance the oil market in second half of 2012," Goldman said.
EYES ON CHINA STIMULUS
Talk that China could implement a stimulus plan in the near future prompted investors to cover short positions during Asia trade on Monday, said Ken Hasegawa, a commodity sales manager at Newedge Japan.
"I don't think we'll see a sharp rebound. What we can see now is some correction after oil lost $20 from the previous high."
Hedge funds and big speculators cut their bullish crude oil bets to the lowest level since late 2010, but the pace of liquidation slowed after their bearish turn, regulatory data showed on Friday.
Uncertainty over the euro zone debt crisis would cap gains in oil prices, Hasegawa said.
Europe remained mired in crisis despite a call by world leaders for Greece to stay in the monetary union and for Europe to balance austerity with growth during the weekend G8 meeting.
They offered no specific prescription for debt-crippled Greece which holds fresh elections next month.
G8 leaders also raised the pressure on Iran on Saturday, signaling their readiness to tap into emergency oil stockpiles quickly this summer if tougher new sanctions on Tehran threaten to strain supplies.
The statement came days ahead of nuclear talks between world powers and Iran in Baghdad.
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