Oil prices steadied at just above $60 a barrel on Monday, pausing from last week's losses, amid growing concerns about the pace of a global economic recovery and its impact on world energy demand.
Oil prices dropped 11 percent last week in their biggest weekly decline since late January amid mounting worries that a economic rebound may not be coming soon to help spur flagging fuel demand.
Crude oil for August delivery edged up 12 cents to $60.01 by 8:24 p.m. EDT, hovering near a six-week low. The contract settled down 52 cents at $59.89 on Friday.
London Brent crude gained 28 cents to $60.80.
The market has been too optimistic about a global economic recovery later this year, but that now looks unlikely to happen, so oil prices are languishing, said David Moore, a commodities analyst at the Commonwealth Bank of Australia, adding that crude stocks were still at high levels in the United States.
Oil's decline on Friday was encouraged by a report that U.S. consumer sentiment wilted in early July to its weakest since March, according to data by the Reuters/University of Michigan Surveys of Consumers, adding to the recession worries that also dragged U.S. stocks lower.
Analysts said oil prices would continue to track the equities markets in the short term. And with Wall Street's rally stalled, this week could be crunch time as big banks' earnings, including Citigroup's
Moore said a raft of key economic data from China, including gross domestic production in the second quarter, industrial output and retail sales, due to be released on Thursday, will also be keenly watched by investors.
Analysts at BNP Baribas said oil prices could see more corrections in the short term as external factors which have helped oil's recent rally, including a weak U.S. dollar and rising equities, are set to reverse course.
Focus will shift back to oil fundamentals which remain weak -- oil demand will contract with the world economy, and OPEC has a large inventory hurdle to overcome, BNP's Harry Tchilinguirian said in a report.
Investors have also been made cautious by U.S. government moves to reign in speculation in energy and metals markets, while the Commodity Futures Trading Commission could have new regulations in place by late October.
Separately, an oil tank blew up at a chemical plant in Urumqi, capital of northwest China's restive Xinjiang region, on Sunday, but local police and refinery officials ruled out a deliberate attack.
In Nigeria, a top rebel leader is expected to be freed early this week, his lawyer said on Sunday, but analysts doubt his release will lead to a significant drop in militant attacks in Africa's biggest oil sector.
Crude oil speculators on the New York Mercantile Exchange cut their net long positions in the week to July 7 as prices fell, data from the Commodity Futures Trading Commission released on Friday showed.
(Reporting by Fayen Wong; Editing by Clarence Fernandez)