Brent oil futures rose above $91 a barrel on Friday, rebounding after hitting an 18-month low, and U.S. crude futures surged nearly 2 percent as a potential storm threatened to disrupt production in the Gulf of Mexico.
An action by the European Central Bank to ease collateral requirements -- a move designed with Spain's woes in mind, caused the euro to rally early and also supported oil futures.
After falling about 4 percent on Thursday oil futures regained some composure as some buyers returned after the market had come under oversold conditions, analysts said.
In London, August Brent crude was up $1.92 at $91.15 by 2:50 p.m. EDT (1850 GMT), having hit a session high of $91.70. It rebounded from a session low of $88.49, the lowest since December 2010. It is on course to end the week down more than 6 percent.
U.S. August crude settled at $79.76, gaining $1.56, after rising to a session high of $80.37. It slid as low as $77.56, the lowest since Oct. 5, 2011, after dropping 4 percent on Thursday. For the week, front-month U.S. crude fell $4.27, or 5.08 percent, the biggest weekly loss since the week to June 1, when prices fell 8.4 percent. U.S. crude has posted two straight weekly losses.
"The ECB's action will add liquidity to the system, and that is helping push up Brent futures. The oil markets are rebounding from oversold conditions, though investors are cautions because the market is well supplied," said Phil Flynn, an analyst at Price Futures Group in Chicago.
At the day's lows, Brent has fallen nearly $40 from the year's high of $128.40 hit in March. U.S crude has dropped $33 from its 2012 of $110.55 also struck in March.
In the Gulf of Mexico, the largest U.S. offshore oil port and Murphy Oil Corp. began evacuating non-essential personnel from their operations.
The U.S. National Hurricane Center said a low pressure system in the Gulf, home to 20 percent of U.S. oil production and 6u percent of natural gas output, had a 70 percent chance of developing into a tropical cyclone over the next two days.
The Relative Strength Index, a closely watched technical signal, showed crude futures in oversold condition -- usually a sign that a rebound may be coming. For Brent, the index was at 23, after hitting 14 on Thursday. U.S. crude's RSI was at 30, after posting at 22 on Thursday. The 30 level is the threshold that indicates the onset of oversold conditions, which both contracts last began hitting in late May.
"Technical indicators show the market is a little bit oversold, so there could be some short-covering around," said Tony Machacek, oil futures broker at Jefferies Bache.