Crude oil prices jumped as much as 2 per cent on Tuesday, shrugging off big drops in Japan's stock market and eroding some of the previous session's losses that were driven by festering concerns about global oversupply.
US crude was up 33 cents at $30.02 a barrel at 0603 GMT (10.03am UAE time), after rising as far as $30.30. The contract fell about 4 per cent on Monday, finishing at $29.69.
Global benchmark Brent was up 7 cents at $32.95 a barrel. It settled the previous session down $1.18 at $33.88.
Prices on Monday were hit by a drop in US equity markets amid persistent fears about the global economic slowdown.
But on Tuesday, oil market traders ignored a more than 5 per cent drop in Japan's Nikkei. Many Asian markets are closed for Lunar New Year holidays.
"Once again we have got a weaker US dollar and I suspect that that's where the bulk of the support is coming from," said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
The US dollar fell against the Japanese yen as sentiment towards most risk assets turned bearish amid concerns about banking stability.
A declining dollar makes oil less expensive for holders of other currencies because most trade is denominated in the greenback, potentially spurring demand and lifting prices.
Still, the glut in world oil markets is unlikely to abate soon, with a Reuters survey showing US crude stocks likely rose by 3.9 million barrels in the week ended on February 5.
Industry group American Petroleum Institute on Tuesday releases its weekly inventory reports followed by official numbers from the US government's Energy Information Administration on Wednesday.
“The fundamentals haven’t shifted. The market remains in surplus, and while that’s the case, it is very difficult for prices to sustain any gains,” McCarthy said.
There is also little sign of any coordination on production cuts among big producers outside the United States after weekend talks between Opec members Saudi Arabia and Venezuela yielded no concrete result.
That dims prospects of any initiative on curbing supply to boost prices, including from producers such as Russia, analysts say.
“Hopes of a coordinated supply cut from Opec and non-Opec members continue to fade,” ANZ said in a research note on Tuesday.