The price of oil rebounded to near $97 a barrel Monday, taking its cue from rising stock markets in Europe.
By early afternoon in Europe, benchmark oil for March delivery was up 72 cents to $96.89 a barrel in electronic trading on the New York Mercantile Exchange. The contract dropped by $1.60 to finish at $96.17 a barrel on the Nymex on Monday.
Oil prices had risen steadily since they traded near $86 a barrel in mid-December on hopes for an improving global economy. But U.S. stock indexes had big declines Monday amid concerns about political stability in Italy and Spain.
However, data published Tuesday showing rising activity in the manufacturing and services sectors in the 17 European Union countries using the euro helped ease those concerns and turn around falling oil prices.
"The slide could continue in the short term if the correction on the financial markets proceeds, but we do not envisage prices receding for any great length of time," said a report from Commerzbank in Frankfurt. "The supply-side risks still prevailing, shrinking OPEC supplies and the brightening global economic outlook all suggest that such a retreat is unlikely."
A weaker dollar also contributed to the rising oil prices by making crude cheaper -- and a more appealing investment -- for traders using other currencies. On Tuesday the euro rose to $1.3540 from $1.3505 late Monday in New York.
Brent crude, the benchmark used to set prices for oil used by many U.S. refineries, was up 95 cents to $116.55 in London.
In other energy futures trading on the Nymex:
-- Wholesale gasoline added 3.45 cents to $3.046 per gallon.
-- Natural gas rose 3.7 cents to $3.352 per 1,000 cubic feet.
-- Heating oil gained 3.2 cents to $3.186 a gallon.
Pamela Sampson in Bangkok contributed to this report.
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