Oil snapped three straight sessions of declines and rose more than 1 percent toward $71 a barrel on Monday, but analysts said sentiment remains fragile and prices could again be hit by macroeconomic pessimism.
U.S. crude for July delivery rose 70 cents to $70.74 a barrel by 0455 GMT (12:55 a.m. ET), while London Brent crude gained 22 cents to $71.93.
There has been a significant decline in oil prices over the past couple of weeks so there might be some traders who think that oil has been oversold and are looking to buy in at these levels, said Toby Hassall, chief commodities analyst at CWA Global Markets Pty Ltd.
Oil could remain as the casualty of negative sentiments in the short term, but it should rebound when the panic subsides because we're still seeing strong growth in Asia and the U.S. economy is also slowly recovering.
Since striking a 2010 high just above $87 a barrel on May 4, crude prices have fallen in eleven of the last fifteen trading days and touched a low of $64.24 on Thursday last week, its weakest since September last year.
Germany's parliament approved on Friday its portion of a $1 trillion safety net to stabilize the euro as fears swirled that Europe's debt crisis and tougher financial regulation may choke economic recovery.
However, worries persist that Greece's debt troubles could spread to other indebted nations, dragging down Europe's economy and curtailing trade to the United States and Asia.
Calls for other European economies to cut spending and slash their budget deficits have also sparked worries that the region's economy would slow, curtailing energy demand.
Although oil prices will no doubt remain at the mercy of broader macroeconomic pessimism, analysts at Barclays Capital said recovering demand in the U.S. and other non-industrialized economies, such as China, the Middle East and India, would lift prices.
With oil fundamentals improving fast, we expect prices to pick up once the phase of severe risk reduction abates, Barclays capital oil analyst Amrita Sen said in a report.
In the short-to-medium term, other potentially supportive factors include the start of the U.S. summer driving season and the start of the hurricane season in the U.S., which lasts from June through November.
Some meteorologists have predicted an unusually destructive hurricane season which could cause offshore oil production in the Gulf of Mexico to shut for extended periods.
Oil's gain also defied a stronger greenback, which makes it more expensive for holders of many other currencies.
The U.S. dollar index <.DXY> rose 0.47 percent against a basket of currencies on Monday, while Asian stocks recouped ground from last week's eight-month lows.
Volatility will be the name of the game on Wall Street this week as uncertainty over the euro-zone debt crisis remains a potent factor.
On the geopolitical front, Iran said it would abandon an offer to ship some of its uranium stockpile abroad if the United States imposes new sanctions, adding that Washington's continued determination to impose sanctions could even lead Tehran to review its cooperation with the U.N. nuclear agency.
(Editing by Ed Lane)