U.S. crude rose above $70 a barrel on Monday, recouping some of last week's losses, but analysts said sentiment remained fragile and prices could again be hit by macroeconomic pessimism.
European stocks advanced in morning trade, following on from gains in Asia. Oil's gain defied a stronger U.S. dollar, which makes the commodity more expensive for holders of other currencies.
U.S. crude rose 32 cents to $70.36 a barrel by 0938 GMT. Brent crude was down 11 cents at $71.57.
Oil in New York has fallen steeply from a 2010 high of $87.15 reached in early May. It touched a low of $64.24 on May 20 -- the weakest for a nearby contract since July 2009.
I think the weakness last week was a bit overdone when you look at the incredibly strong demand data from China, said Christopher Bellew, a broker at Bache Commodities. It probably won't stay down here too long.
Worries persisted that Greece's debt troubles could spread to other indebted nations, weakening Europe's economy and curtailing trade to the United States and Asia.
Oil could remain as the casualty of negative sentiments in the short term, but it should rebound when the panic subsides, said Toby Hassall, chief commodities analyst at CWA Global Markets Pty Ltd.
World oil demand is expected to rise by 1.62 million barrels per day (bpd) in 2010, led by emerging economies such as China, according to the International Energy Agency. Global consumption declined in 2009.
Analysts at Barclays Capital said recovering demand would lift prices.
With oil fundamentals improving fast, we expect prices to pick up once the phase of severe risk reduction abates, Barclays oil analyst Amrita Sen said in a report.
(Reporting by Alex Lawler and Fayen Wong in Perth; Editing by William Hardy)