Oil rose on Friday due to concerns that a storm in the Caribbean may move toward the Gulf of Mexico, where oil facilities are clustered and BP continues to fight an oil spill.
But gains were tempered by data showing slower-than-expected economic growth in the United States in the first quarter and worries about the fragility of global recovery ahead of a weekend summit of Group of 20 nations.
By 1411 GMT, U.S. crude futures were up 89 cents to $77.40 a barrel, bouncing from the day's low of $75.90. Brent crude futures were up by 47 cents to $76.94.
The greatest risk will be with the potential development of a tropical storm that could make its way to the Gulf of Mexico. The NHC (National Hurricane Center) has now a high probability for the tropical low to be upgraded to Tropical Storm status over the next 48 hours, said Olivier Jakob with Petrometrix.
To kick off the Atlantic hurricane season this year, a low-pressure area over the western Caribbean Sea strengthened further and now has a high 70 percent chance of developing into a tropical depression over the next 48 hours, the NHC said on Friday.
Most weather models project the system will cross Mexico's Yucatan Peninsula over the next few days before entering the central Gulf of Mexico, where BP Plc (BP.L) is trying to clean up its oil spill.
Shares in the British oil major hit a 14-year low on Friday morning.
Crude oil and product inventories remain much higher than year-ago levels in the United States, the world's top oil market.
High inventory levels can provide a cushion to reduce price spikes should bad weather cause supply disruptions. This was the case when hurricanes Katrina and Rita hit the U.S. Gulf of Mexico in 2005.
Ahead of the G20 summit, MSCI's all-country world stock index .MIWD00000PUS fell and European shares turned negative, having opened slightly higher. .EU
The U.S. Commerce Department revised first-quarter U.S. gross domestic product lower in its final estimate. The world's largest economy expanded at a 2.7 percent annual rate instead of the 3 percent pace reported last month.
But mixed signals came from the Thomson Reuters/University of Michigan's Surveys of Consumers, indicating that U.S. consumer sentiment rose in June to its highest since January 2008 while reports of job losses were down sharply from a year ago.
A gauge of current economic conditions also rose to its highest since January 2008.
Oil prices have fallen from about $87 in early May due to euro zone concerns triggered by Greece's sovereign debt crisis and ample supplies.
U.S. crude oil is expected to average $79.86 a barrel in 2010, a Reuters poll showed, a slight drop from May's survey and the second consecutive lower monthly forecast after more than a year of rising expectations.
(Additional reporting by Alejandro Barbajosa in Singapore; editing by Keiron Henderson and James Jukwey)