Brent crude futures held steady above $112 on Monday, extending the previous session's sharp gains on hopes European policymakers would reach an agreement to tackle the euro zone's debt crisis and help stem a slowdown in oil demand growth.
France's Finance Minister Francois Baroin told the Group of 20 major economies over the weekend that Paris and Germany, the leading euro zone powers, were on their way to agreeing to a plan to reduce Greece's debt and stop a contagion. That optimism, and an almost 11% slide in prices last month, is making oil attractive for investors.
Brent crude traded 5 cents higher at $112.28 a barrel by 0455 GMT, after rising to as much as $113. U.S. crude increased 29 cents to $87.09.
"Oil markets have hit a bottom and sentiment is turning around to positive as the demand outlook improves," said Tetsu Emori, a fund manager at Astmax Co Ltd in Tokyo.
"The market was oversold because of the pessimism surrounding the global economy. Investors are finding the prices attractive."
Gains were capped as the world's biggest energy consumer China said on Saturday that apparent oil consumption grew only 3.2% from a year earlier in the third quarter, down from the 5% rise in second quarter and 9.3% in the first quarter.
Asian shares rose on Monday and the euro held firm after the world's leading economies pressed Europe to act decisively within eight days to resolve the euro zone's debt crisis. Gold held steady, while base metals edged higher.
In unusually direct language, G20 finance ministers and central bankers said they expected an Oct. 23 European Union summit to "decisively address the current challenges through a comprehensive plan".
Brent's November contract, which expired on Friday, posted a weekly gain of 8.3%, the largest since the week to Feb. 25. U.S. crude rose $2.57 to settle at $86.80 a barrel, the highest since Sept. 20. It posted a weekly gain of 4.6%, the biggest since the week to Oct. 7.
DEMAND OUTLOOK
Oil prices were also supported on Friday by U.S. retail sales, which grew at their fastest pace in seven months in September, beating expectations, while sales for August and July were revised higher as well.
The demand outlook for oil will improve during winter when heating fuel sales get a boost, triggering a rise in crude requirement, said Emori, who also expects consumption to recover in the United States and other industrialised nations as governments work on reviving the economy.
Supply disruptions continue in the North Sea and Nigeria, tightening availability as crude shipments from Libya remain irregular.
Libyan government fighters battled on Sunday to subdue pockets of resistance by pro-Gaddafi fighters, whose refusal to abandon the ousted leader's hometown of Sirte is delaying the country's move to democracy.
"While a rapid resumption of Libyan production remains a wild card, until sustained exports are seen, the Brent and light sweet crude market will remain sensitive to minor disruptions," analysts at JPMorgan said in a report.
In Syria, security forces shot dead three mourners and injured 20 on Saturday when they fired on a protester funeral procession in central Damascus while troops loyal to President Bashar al-Assad fought army defectors west of the capital, witnesses said.
U.S. regulators this week will finalize their toughest crackdown yet on volatile oil and metal markets, concluding nearly four years of fierce debate over whether limits on speculative trade can tame prices.
