Oil rose to more than $47 on Monday, reversing earlier losses, on the view that OPEC cuts had started to take effect and a rally in equity markets.
A production outage in Nigeria and security concerns about Iran also helped prices to reverse a 5 percent fall that was triggered by an OPEC decision on Sunday to leave existing output targets unchanged.
U.S. light crude was trading 84 cents up at $47.09 a barrel by 1617 GMT, after falling to as low as $43.62 a barrel. London Brent crude was trading down by 90 cents at $44.03.
Full compliance with OPEC's cuts would take more than 800,000 barrels per day from the market. OPEC's compliance has been estimated at about 80 percent.
In view of the still fragile global economy, downside risks to the oil price will not be eliminated until the very end of 2009, Adam Sieminski, Deutsche Bank's chief energy economist, said in a research note.
However, looking into the second quarter we believe oil prices are starting to find a floor.
World stocks climbed strongly on Monday for a fifth session running, lifted by hopes the U.S. economic downturn may be bottoming out.
In Nigeria, the Africa's largest oil producing country, an attack on an oil pipeline on Friday caused some production shut in, U.S. oil major Chevron said on Monday.
In the oil rich Middle East, U.S. forces shot down an unmanned Iranian aircraft in Iraqi airspace last month, a U.S. military spokesman confirmed on Monday.
OPEC agreed on Sunday to enforce existing output curbs more strictly, rather than introduce new cuts, to help heal the global economy even though crude oil inventories have remained relatively high and fuel demand has been weak.
Some analysts said OPEC's adherence to the existing cuts might be enough to offset falling demand and reverse the recent increases in oil inventories in many countries, including the world's largest oil consumer, the United States.
We believe the cuts made to date, coupled with falling non-OPEC output, could already be enough to offset weaker demand and result in observable inventory declines in the coming months, Collins Stewart said in a research note.
The Organization of the Petroleum Exporting Countries will next meet in May.
Ali al-Naimi, the oil minister of the world's top oil producer and OPEC's most influential member, Saudi Arabia, said on Monday he was very happy with OPEC's decision.
The producer group's Angolan president said in an interview on Sunday the supply curbs had brought some stability to oil markets, although prices remained too low to encourage investment in new supplies.
U.S. Energy Secretary Steven Chu said he was pleased with the outcome.
(Editing by James Jukwey and Sue Thomas)