Oil climbed more than $2 on Monday, recouping part of Friday's 10 percent dive as European leaders took bolder steps to pull the banking sector out of crisis.
US crude for November delivery rose $2.03 to $79.73 a barrel by 0343 GMT, paring earlier gains to a peak above $81 a barrel as the initial flush of enthusiasm over the latest efforts to stave off a global recession lost some lustre.
Prices plunged nearly $9 on Friday to their lowest since Sept 10, 2007, having dumped 17 percent over last week, the biggest one-week loss since the 2003 war in Iraq.
London Brent crude rose $1.91 to $76.00 a barrel.
"The announcements from over the weekend would have some positive effects on the markets, even though it's still in very early days at this stage to say if they would put an end to the financial crisis," said David Moore, a commodities analyst at the Commonwealth Bank of Australia.
In Europe, government leaders agreed on commitments to provide capital for banks caught short of funds because of frozen money markets and to insure or buy into new debt issues, the latest in a series of bold measures.
The US Federal Reserve will consider all options in seeking to stabilise credit markets in a period that may bring negative growth, Dallas Fed President Richard Fisher said.
Goldman Sachs, once one of the foremost bulls on commodities, turned a near-term bear on Monday after conceding that global financial turmoil would take a far bigger toll on demand, warning that $50 oil was possible if the crisis deepened.
"We have underestimated the depth and duration of the global financial crisis and its implications on economic growth and commodity demand," its commodity markets research team said.
The bank cut its year-end US crude oil target to $70 a barrel, down from a previous forecast of $115 a barrel, and slashed its average 2009 forecast by a third to $86 a barrel.
The price fall has caused some Opec members to call for a cut in production levels, and the cartel has agreed to hold an emergency meeting in Vienna on Nov 18 to discuss the impact of the global financial crisis on the oil market. - Reuters