Oil prices rose to near $96 a barrel Thursday after plunging the previous session on investor pessimism that Europe's debt crisis will trigger a recession on the continent next year.
By early afternoon in Europe, benchmark crude for January delivery was up 82 cents to $95.77 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $5.19, or 5.2 percent, to settle at $94.95 on Wednesday.
In London, Brent crude was up 93 cents at $105.95 on the ICE Futures exchange.
Crude dropped Wednesday amid growing concerns about slowing global oil demand. The International Energy Agency and the Organization of Petroleum Exporting Countries have recently forecast fuel consumption will grow slightly next year, but some analysts say even those modest expectations may be too optimistic.
Before Wednesday, crude had traded near $100 for the last month after jumping from $75 in October amid signs the U.S. economy is slowly improving.
"The latest demand forecasts from both OPEC and the IEA still look too high and oil prices have further to fall," Capital Economics said in a report. The consultancy expects Brent crude to fall to near $85 by the end of next year.
Investor fears that European leaders may not be able to contain the region's debt woes helped pull the euro down to its lowest level against the U.S. dollar in 11 months Wednesday, but its recovery Thursday to above $1.30 helped lift oil prices a little.
A weaker dollar makes crude cheaper and a more attractive investment for traders holding other currencies, usually boosting crude prices.
"It seems that there is still high volatility and nervous trading that dominates the oil market and weighs heavily on market sentiment," said a report from Sucden Financial in London. "As OPEC decided to keep the production levels at 30 million barrels per day for 2012, the main focus has transferred to the ongoing debt crisis in the eurozone with ongoing concerns about the future of the European economies."
In other energy trading on the Nymex, natural gas fell 2.2 cents at $3.114 per 1,000 cubic feet. Heating oil gained 3.04 cents to $2.8603 a gallon and gasoline futures added 3.31 cents to $2.5368 a gallon.
Alex Kennedy in Singapore contributed.
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- New York Mercantile Exchange