Oil's sharp sell-off paused n Friday as the impact of a surprise announcement of emergency fuel stocks from consumer nations faded.
Brent crude futures eased 38 cents to $106.88, while U.S. crude futures recovered 45 cents to $91.47.
Brent fell around 6 percent on Thursday after consumer watchdog the International Energy Agency (IEA) announced the release of 60 million barrels of government-held stocks over the next 30 days.
The extra oil -- only the third emergency release in the IEA's 37-year history -- will increase global supply by some 2.
Leading commodities banks JP Morgan and Goldman Sachs cut their oil price forecasts following Thursday's IEA announcement.
The biggest impact on Thursday was on the spreads between futures contracts as the market reacted to increased availability extra crude for immediate delivery -- eliminating the premium for spot barrels versus crude for delivery at the end of the year. http://link.reuters.com/mav32s
Other analysts said physical oil could be offered at discounts, piling further pressure on the international market, although they said there was uncertainty about the longer term implications.
NO SAUDI COMMENT YET
Saudi Arabia, the world's leading exporter, has yet to make any comment on the release.
After the Organization of the Petroleum Exporting Countries last month collapsed in disarray without reaching a supply deal, Saudi Arabia had pledged to produce whatever the market needed.
Saudi Arabia will be crucial -- will it stick to its promise to increase its output to 10 million barrels a day or not? asked Carsten Fritsch, an analyst at Commerzbank in Frankfurt.
If they don't, then the IEA decision will have backfired. Maybe they will scale back production in July after this stock release.
Emergency reserves previously have been used for severe supply disruption and some analysts said using them now -- four months after disruption of exports began from war-torn OPEC member Libya -- amounted to a change of use.
If you look at the world at an aggregate level, there is no doubt that, while there are pockets of tightness, there are sufficient supplies to meet demand at the moment, said Ben Westmore, a commodities analyst at National Australia Bank.
Anxiety about the fragility of the world economy was thought to have been a major consideration for the IEA.
Breaking the back of this price spiral was therefore important in so far as some of the recent inflationary gains will now likely be reversed, said Edward Meir, senior commodity analyst at MF Global.
Brent peaked above $127 a barrel in April this year -- below the all-time high of more than $147 a barrel for U.S. crude hit in 2008.
Some analysts and investment managers expressed concern that the impact would be short-lived.
The entire purpose of this is political -- the object is to decrease gasoline prices during the 2011 summer driving season in North America and Europe, said Monty Guild, chief executive of U.S.-based Guild Investment Management.
We predict that the effect of this sale will be unnoticeable in three months. At that time oil prices will be rising and possibly will be higher than they are today.
(Additional reporting by Alejandro Barbajosa and Ikuko Kurahone)