Crude futures broke a four-session losing streak Monday, posting gains on signs that European leaders may be readying further steps to support the currency union.
Light, sweet crude for July delivery settled 75 cents higher at $83.98 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange for July delivery settled 42 cents higher at $98.85 a barrel.
Oil rose as investors took profits from bets on slumping crude prices. Brokers said that after steep declines stemming from Europe's debt crisis, investors are awaiting more signals on whether the euro zone will take further actions before adding to positions. Over the weekend, the Wall Street Journal reported that Germany is signaling it may be willing to support further euro-zone integration.
"Everyone is getting a little bump off the lows. What we are seeing here today is that the talks in Europe might mean something dramatic may happen to stop the bleeding," said Phil Flynn, senior market analyst at Price Futures Group.
Over the past month oil prices tumbled along with stocks and other commodities. Crude has fallen roughly 20% since the beginning of May, and dropped 3.8% Friday after bleak U.S. jobs numbers suggested the U.S. economic recovery is also suffering amid Europe's debt crisis.
Oil investors fear that a deepening financial crisis in Europe will further weigh on the region's economy, pulling down demand for oil and fuel products.
Still, there are some questions about whether prices have fallen too far, too fast, prompting some traders to take profits off the table. Futures failed to drop below $81 a barrel Monday, a sign that the next move for prices may be towards $85, said Tony Rosado, a broker with GA Global Markets.
"The market is looking for some type of a bounce," Rosado said.
While oil could fall further, it's likely that "short-covering" rallies will interrupt further drops, said Dominick Chirichella, an analyst at the Energy Management Institute, in a client note. "The market is very oversold right now," he said.
After sharp declines in recent weeks, money managers including hedge funds trimmed their net-long position in Nymex crude-oil futures by a slim 0.1% in the week ended Tuesday, according to data released Friday by the Commodity Futures Trading Commission.
Money managers held a net-long position of 136,584, down from 136,751 last week. In early May, the net-long position stood at 219,817.
Front-month May reformulated gasoline blendstock, or RBOB, settled 1.39 cents higher at $2.6707 a gallon. May heating oil settled 0.10 cent lower at $2.6269 a gallon.
Copyright (c) 2012 Dow Jones & Company, Inc.
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