Oil rises to around $126, stabilising after drop

Oil rose on Friday to around $126 a barrel, finding some stability after two weeks of losses, as buyers came back into the market before the weekend.
Concern that high prices and the slowing U.S. economy will undermine demand have driven oil down from a record peak of $147.27 on July 11, but technical trading and a short-covering bounce helped buoy prices on Thursday.
U.S. crude rose 66 cents to $126.15 a barrel by 1200 GMT. It gained $1.05 a barrel a day ago, recovering from a seven-week low. London Brent rose 48 cents to $126.92.
"We're definitely going to see some short-covering today after falling 15% in just over a week and as we approach the weekend," said Jonathan Kornafel, director, Asia, Hudson Capital Energy.
"Having said that, we can still head lower after some of the panic buying ahead of the weekend," he added.
Oil also was taking its cue from equity markets, which fell in the U.S. on Thursday amid concern about the health of the financial sector and the global economy. European stocks headed lower on Friday.
"Yesterday's sharp decline in the equity markets — should it continue into a second day on Friday — may lead to some firming in the commodity space," said Edward Meir, analyst at MF Global, in a report.
But analyst Jim Ritterbusch, president of Ritterbusch & Associates, said crude could drop as low as $117 within about a week, while others said they expected trading to be volatile in a wide range.
"We have identified the $115-$140 interval as the most likely trading range for the quarter," Barclays Capital said in a research note.
Even after the recent price fall, oil is up almost 30% in 2008 and is up from below $20 in early 2002 due to rising demand from fast-growing economies such as China.
Oil's rally, which the OPEC exporter group has blamed on factors beyond supply and demand, has led to pressure on politicians to take action to help consumers paying higher fuel prices.
The U.S. Senate will vote on Friday on a Democratic bill that seeks to curb excessive speculation in the energy markets, but Republicans said they had the votes to block its passage.