Oil prices edged toward $93 a barrel Friday as financial markets stabilized after a sharp two-week sell-off caused by the latest flare-up in Europe's debt crisis and a gloomy economic outlook.
By early afternoon in Europe, benchmark oil for June delivery was up 16 cents to $92.72 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 25 cents to settle at $92.56 in New York on Thursday.
In London, Brent crude for July delivery was down 49 cents at $107 per barrel on the ICE Futures exchange.
Crude prices had dropped 13 percent from $106 two weeks ago, when the U.S. reported weaker than expected job numbers, followed by signs last week that China's economy may be slowing more than previously forecast.
This week, political turmoil in Greece raised the likelihood that country could soon leave the euro common currency, a move that would shake confidence in other debt-burdened European countries such as Spain and Italy, slow the global economy and reduce demand for fuel.
"The pall over the market since March has been the worsening European crisis," said The Energy OverView from KilduffReport.com. "The downdraft since the beginning of the month has accelerated and is probably unsustainable, making violent corrections likely."
On Thursday, rating agency Moody's downgraded its credit grade for 16 Spanish banks while a newspaper reported depositors were rushing to withdraw their money from Bankia, a troubled Spanish bank that was effectively nationalized just one week ago.
The dollar's slight retreat against the euro made crude cheaper for traders using other currencies and contributed to recovering oil prices. The euro was up to $1.2717 on Friday after falling to as low as $1.2642 earlier in the session.
Investors are also closely watching the U.S. economy, which has shown signs of uneven growth in recent months. The government said Wednesday that crude inventories rose again last week to their highest since 1990, suggesting demand is weak.
"The oil market remains highly sensitive to any negative macroeconomic news, particularly with stockpiles at 22-year highs," energy trader and consultant Ritterbusch and Associates said in a report.
A sustained drop in crude should eventually ease gasoline prices, which would slow global inflation and allow policymakers to implement stimulus measures or loosen monetary policy to boost economic growth.
In other energy trading, heating oil was down 1.1 cents at $2.8380 per gallon and gasoline futures slid 0.72 cent at $2.8710 per gallon. Natural gas rose 8.2 cents at $2.676 per 1,000 cubic feet.
Alex Kennedy in Singapore contributed to this report.