Oil Continues to Show Gains in Corrective Move

Global crude oil continued to show modest gains on Friday, bouncing from near four-year lows as investors bought back into a market they said was oversold, and as fighting in Iraq increased political risk.

Oil has lost more than a fifth of its value since June on heavy oversupply, signs of weak demand growth and indications that key oil producers, particularly Saudi Arabia, have a limited appetite to intervene on prices.

"It's corrective," said Andy Lebow at Jefferies LLC. After a violent $15-a-barrel swing in just two weeks, the market is likely to test lows again before it's clear that a true bottom was hit," he said. "You can't say that the downtrend is definitively over."

The over-arching downtrend may bring prices to the $70 range by the end of the year, said Tariq Zahir at Tyche Capital Advisors. "We're definitely and technically at oversold levels. Everyone's picking bottoms," he said.

Brent for December rose $1.52 to a high of $87.34, before slipping back to around $85.83 a barrel by 1:04 p.m. ET (1704 GMT), but was still on track for its fourth weekly loss in a row. The November Brent contract expired on Thursday.

U.S. November crude, heading for its third weekly decline, was up 18 cents at $82.88.

Optimism was also felt in European stock markets, which jumped the most in seven months after weeks of sharp losses.

"I think we'd need to see signs that Europe is in recession to go significantly further down," said Gene McGillian at Tradition Energy.

Developments in Iraq supported prices, as Islamic State fighters showed their strength despite an extensive air campaign by the United States and other Western and regional powers.

Militants carried out a series of attacks in Baghdad on Thursday, killing at least 47 people. Islamic State has consolidated its position in the western province of Anbar in recent weeks.

Iraqi pilots from the era of former president Saddam Hussein have joined Islamic State and are flying captured fighter jets in Syria, a group monitoring the war said, indicating co-operation between the radical Sunni group and former military officers.

Analysts said oil was in a downtrend in the longer term.

Leading oil analysts across Wall Street have raced this month to slash their price forecasts by as much $12 a barrel as old assumptions about Saudi Arabia's readiness to defend $100 crude are radically revised.

The head of Kuwait's national oil company on Wednesday said that the oil-rich Gulf country had no plans to cut output, even as prices fell below $83 a barrel.

Libya called for output cuts on Friday, but remains the only African OPEC member, out of four, to do so.

(By Jessica Resnick-Ault; Additional reporting by Florence Tan in Singapore; Editing by Christopher Johnson and Chris Reese)