Oil jumped by a dollar to above $76 a barrel on Friday in a technical rebound from the steepest three-day decline since mid-May, and as the euro surged after strong second quarter German economic growth.
The euro extended its gains against the dollar and the yen on Friday after data showed German gross domestic product grew 2.2 percent in the second quarter, the biggest gain in 23 years and ahead of forecasts.
Asia stocks also extended gains as the German data eased fears about the strength of global growth.
U.S. crude for September delivery rose as much as $1 on Thursday after a 7 percent tumble in the past three days that took prices to their lowest since July 19.
By 3:24 a.m. EDT, the contract was up 67 cents at $76.41 a barrel while London Brent crude rose 66 cents to $76.18 a barrel.
The euro zone economies are progressing better than what everybody feared, Serene Lim, a Singapore-based oil analyst at ANZ Global said, referring to mounting fears of a slowdown in economic growth which spooked the markets this week.
The past week has been a bad one so we could see some sort of brief rebound (in oil prices) and long investors coming in to buy into dips, she said.
Despite the gains on Friday, front-month crude is still heading for a more than 5 percent fall this week, its biggest in six weeks.
A further rise to $77.20 for U.S. crude is possible, with both the wave pattern and RSI indicator suggesting a possible completion of the sharp decline, according to Reuters analyst Wang Tao.
ECON WOES STILL WEIGH
The strong euro pushed down the dollar index .DXY, off 0.5 percent on Friday at 82.221 after rising 0.40 percent on Thursday.
A weaker dollar makes oil more affordable for holders of other currencies.
However, the market is likely to stay cautious ahead of a slew of U.S. indicators such as consumer price data and July retail sales, as well a first reading on eurozone GDP at 5 a.m. EDT.
Tokyo-based Mizuho Securities trader Ryuichi Sato said the oil price rebound is likely to be temporary given that the economic outlook remained weak and the peak gasoline demand season in the U.S. is about to end.
The market remains cautious about the downside, he said.
(Reporting by Florence Tan; Editing by Michael Urquhart)