Brent crude oil prices hovered above $99 a barrel on Friday after surpassing $100 earlier in the session and recovering some ground after a steep six-day decline.
After a brief run-up on the back of gains in the S&P 500 stock index, oil prices retreated following a credit rating downgrade for the United Kingdom boosted the U.S. dollar, which weighed on prices for dollar-linked commodities.
"The currency started happening first, and then commodities were starting to give it up. The UK downgrade puts dollar green, and that puts a lot of pressure on commodities priced in dollars," said Bill Baruch, senior market strategist at iitrader.com in Chicago.
Analysts said the market seemed to be stabilizing after a week of heavy liquidation in which prices tumbled from over $103 as of last Friday, along with a rout in gold and industrial metals.
Most U.S. stocks edged higher on Friday, bouncing back a day after the S&P 500 closed below its 50-day moving average for the first time this year.
Friday morning's gains in the S&P 500 initially supported a "risk-on" trade, and bargain hunters snapped up below-$100 oil, sending Brent briefly above $100 a barrel.
The May U.S. crude contract expires Monday, April 22.
"This remains a market very much driven by the equity markets. They've been rebounding and we're just knocking along with that," said Kyle Cooper, managing director of research at IAF Advisors in Houston, Texas.
"Crude inventories are at an all-time high, but we're up today," he added. "There are some people who want to believe it's a physical market, but it's not. It's a financial market."
Yet worries about global demand and oversupply persist, and market participants remained cautious as to whether the recovery had legs.
"Oil prices were technically oversold so we are seeing some buyers coming in but they are not great volumes," said Rob Montefusco, an oil broker at Sucden Financial in London. "There is nothing to suggest we can go up on a sustained basis - we were just overdone on the downside."
Brent crude poked above 30 on the relative strength index (RSI), a technical momentum indicator, for the first time this week.
A reading of 30 or below indicates an oversold condition to chart-watching traders.
Front-month oil prices are still on course for a fall of more than 3 percent for the week, after a cut in oil demand forecasts by global energy agencies and weak economic data from the United States and China, the world's two largest oil consumers.
Data released during the week contributed to falling prices. Chinese first-quarter GDP growth was seen as disappointing, down at 7.7 percent from 7.9 percent in the fourth quarter. In the United States, the number of people filing new claims for unemployment benefits rose last week, and factory activity in the nation's mid-Atlantic region cooled in April.
Oil prices are down nearly $10 a barrel from the start of this month. Brent fell to its lowest level since July 2012 on Thursday at $96.75 a barrel after commodities took a hammering across the board earlier in the week.
Earlier in the week gold suffered its worst two-day fall in 30 years. Copper is still down below $7,000 a tonne, on course for its worst week since 2011.
But with the exception of industrial metals, the complex now appears to have stabilized. "There is a general feeling in the market that Brent won't go much below $100 at this stage as a lot of speculative length has now been liquidated," said Ole Hansen, head of commodity strategy at Saxo Bank.
The $100 level is seen as critical, because it is a budget breakeven point for OPEC members such as Iran, Iraq and Algeria.
"OPEC doesn't want to see the price fall much below $100, and given that they continue to produce at very high levels, they can just turn the taps down a little bit, which would quickly change the balance in the market," Hansen said.
Iran and Venezuela have already raised concerns about the price fall and said discussions had taken place over whether to call an emergency OPEC meeting before the group's scheduled meeting at the end of May.