Oil rose above $81 a barrel on Monday after governments around the world acted to boost confidence in the global banking system, spurring a rally in European and Asian stock markets and commodities.
But investment bank Goldman Sachs said the financial crisis had already done more damage than it expected to commodity demand and warned that a slide to $50 a barrel for oil could be possible.
US crude for November delivery was up $3.70 at $81.40 a barrel by 7:10 a.m. EDT. Prices had plunged on Friday to their lowest since September 10, 2007. London Brent crude was up $3.42 at $77.51 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.
Goldman Sachs, a longstanding commodity bull, turned a near-term bear on Monday after conceding that global financial turmoil would take a far bigger toll on demand. It warned 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 U.S. 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.
A fall in demand in the United States and other developed economies has helped drive oil down nearly 50 percent from its July peak above $147 a barrel.
A boom in consumption from emerging markets such as China had contributed to a six-year rally in commodity prices.
Oil's fall has caused some members of the Organization of the Petroleum Exporting Countries to call for a cut in production levels.
The producer group has agreed to hold an emergency meeting in Vienna on November 18 to discuss the impact of the global financial crisis on the oil market.
'Poor demand and low refining margins should already translate into a lower call on Opec crude oil,' said Olivier Jakob of consultancy Petromatrix.
Jakob said the market was starting to price in an OPEC cut, with the only uncertainty being on the size of the cut.
Iran is set to push for a cut in oil output at the meeting, its oil minister said in comments published on Sunday, adding investment conditions in the oil industry would be severely hit unless OPEC acted decisively to arrest the fall in prices.
Saudi Arabia, the world's biggest exporter and OPEC's most influential member, has cut November supplies to one major European refiner, according to a trade source. But the kingdom told major Asian refiners that it would maintain crude oil shipments unchanged.-Reuters