LONDON - Oil rose $2 to more than $131 a barrel on Wednesday, rebounding from a sharp drop that had been triggered by concerns about a slowdown in world energy demand.
"The bounce was more technical, with the sell-off a bit too sharp and once again buyers have stepped in to buy the dips," said Addison Armstrong, director of market research at Tradition Energy.
Encouraging buying, Nigerian militants said they planned to carry out a series of car bombings in the oil-producing Niger Delta to mark President Umaru Yar'Adua's first year in office.
U.S. crude settled up $2.18 to $131.03 a barrel, off lows of $125.96 hit earlier in the session but still well-below the record of $135.09 hit last week. London Brent crude rose $2.63 to $130.93 a barrel.
Oil prices have doubled since last year amid growing concern over supplies that have been squeezed by rapid growth in developing Asian economies and repeated supply disruptions from major producers like Nigeria.
But the market has been knocked off its peak by growing evidence that consumer nations are struggling to cope with the spike -- feeding expectations that world energy use could flag in the coming months.
Gasoline demand in Britain in April was running 7 percent below a year ago, while demand for diesel was down nearly 2 percent, according to government figures. U.S. fuel demand also has lagged amid record pump prices and an economic downturn.
Analysts cited concern that Asian energy demand growth could drop soon as governments in the region cut subsidies.
"There are signs that soaring energy prices are now even starting to cause ripples in the booming Asian economies," said Edward Meir at MF Global.
Smaller Asian oil consumers such as Taiwan, Indonesia and Sri Lanka have all raised domestic fuel prices, and India also is poised for a modest increase.
Soaring fuel costs have triggered a wave of protests around the world. Convoys of trucks converged on London on Tuesday, while in France fishermen blocked road and rail access to the fuel depot of the country's largest oil refinery at Gonfreville, owned by Total (TOTF.PA: Quote, Profile, Research).
Oil's rebound came despite a rally in the dollar after a report showed new orders for U.S. consumer goods for April fell less than expected.
The U.S. dollar has maintained a strong negative correlation with commodities markets in recent months, as a weaker dollar strengthens the purchasing power of buyers using other currencies.
Data from the U.S. Energy Information Administration due on Thursday is expected to show nationwide crude inventories unchanged, gasoline supplies down slightly and distillate inventories up slightly.
"The bounce was more technical, with the sell-off a bit too sharp and once again buyers have stepped in to buy the dips," said Addison Armstrong, director of market research at Tradition Energy.
Encouraging buying, Nigerian militants said they planned to carry out a series of car bombings in the oil-producing Niger Delta to mark President Umaru Yar'Adua's first year in office.
U.S. crude settled up $2.18 to $131.03 a barrel, off lows of $125.96 hit earlier in the session but still well-below the record of $135.09 hit last week. London Brent crude rose $2.63 to $130.93 a barrel.
Oil prices have doubled since last year amid growing concern over supplies that have been squeezed by rapid growth in developing Asian economies and repeated supply disruptions from major producers like Nigeria.
But the market has been knocked off its peak by growing evidence that consumer nations are struggling to cope with the spike -- feeding expectations that world energy use could flag in the coming months.
Gasoline demand in Britain in April was running 7 percent below a year ago, while demand for diesel was down nearly 2 percent, according to government figures. U.S. fuel demand also has lagged amid record pump prices and an economic downturn.
Analysts cited concern that Asian energy demand growth could drop soon as governments in the region cut subsidies.
"There are signs that soaring energy prices are now even starting to cause ripples in the booming Asian economies," said Edward Meir at MF Global.
Smaller Asian oil consumers such as Taiwan, Indonesia and Sri Lanka have all raised domestic fuel prices, and India also is poised for a modest increase.
Soaring fuel costs have triggered a wave of protests around the world. Convoys of trucks converged on London on Tuesday, while in France fishermen blocked road and rail access to the fuel depot of the country's largest oil refinery at Gonfreville, owned by Total (TOTF.PA: Quote, Profile, Research).
Oil's rebound came despite a rally in the dollar after a report showed new orders for U.S. consumer goods for April fell less than expected.
The U.S. dollar has maintained a strong negative correlation with commodities markets in recent months, as a weaker dollar strengthens the purchasing power of buyers using other currencies.
Data from the U.S. Energy Information Administration due on Thursday is expected to show nationwide crude inventories unchanged, gasoline supplies down slightly and distillate inventories up slightly.
