Oil rebounds despite worries about ample supplies

The rebound occured despite concerns about abundant global supplies and weaker economies in Europe and China

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Oil prices rebounded sharply Friday from the prior day's dives, despite concerns about abundant global supplies and weaker economies in Europe and China.

West Texas Intermediate for January delivery leaped $2.41 to close at $56.52 a barrel on the New York Mercantile Exchange, more than wiping out Thursday's loss that hit a fresh five-year low.

Brent North Sea crude for February delivery, the international benchmark, settled at $61.38 a barrel in London, up $2.11 from Thursday's closing level.

"I think the facts that have driven us to these five-years low are still the primary drivers on the market, those being the global oversupply and the [weakened] economic conditions in China and Europe that are curbing crude demand," said Gene McGillian of Tradition Energy in a market note.

"But we are in temporary oversold conditions, and we're heading into the final weeks of the year, and we see traders that are making profits on short positions."

Oil has shed about half its value since June, and a decision in November by the Organization of the Petroleum Exporting Countries to maintain output levels despite falling prices has weighed on the market.

"The petroleum markets continue to chop sideways within the recent trading range, having located some buying interest at the fresh five-year lows reached this week," said Tim Evans of Citi Futures.

For Evans, Friday's rebound in part was a "simple portfolio rebalancing, with traders judging that there's less downside risk and perhaps somewhat more upside potential from current levels, at least relative to where prices were at any point over the past six months."

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