Oil prices rose $1 to over $41 a barrel on Tuesday as expectations that producer group Opec will cut production again countered wider economic concerns. US crude traded up $1.10 to $41.25 a barrel by 2:25 pm EST (1925 GMT), while London Brent crude rose $1.14 to $43.35 a barrel.
Slumping demand due to the global recession has sent crude prices off highs above $147 a barrel in July, prompting the Organisation of Petroleum Exporting Countries to agree to a series of deep production cuts. Some Opec members are calling for another reduction when the cartel next meets this month.
"The crude oil market is being buffeted on the one hand by the global economic worries and what Opec might do at its meeting on March 15," said Andy Lebow, a broker at MF Global in New York. Libya's top Opec official, Shokri Ghanem, said markets were still oversupplied and the exporter group needed to reduce output, either through better compliance with existing supply curbs or a new cutback.
Opec President Jose Botelho de Vasconcelos said the group has yet to decide whether to cut output further when it meets. Price support also came after Royal Dutch Shell Plc shut a number of oil installations at its Nigerian venture following explosions on a pipeline. Production outages in the Opec nation helped support prices during oil's record rally last year.
Crude prices dropped 10 percent on Monday as more grim economic news battered global equity markets. US stocks mostly edged higher after US President Barack Obama said share prices are potentially a good deal at current levels, offsetting persistent uncertainty about plans to shore up the financial system.
A Reuters poll of analysts ahead of weekly inventory data from the American Petroleum Institute and the government's Energy Information Administration forecast US crude inventories rose by 1.2 million barrels last week, with fuel stocks seen falling.