Oil nears $116 on weaker dollar
Brent oil fell below $114 a barrel this morning, as manufacturing activity in China pulled back from two-year highs.
Brent crude rose close to $116 a barrel today due to a weaker dollar, while investors awaited the outcome of Italy's elections to gauge the troubled region's economic outlook.
Prices reversed earlier losses over worries that a retreat in China's manufacturing activity would dent demand from the world's top energy consumer.
Brent gained $1.66 to $115.76 a barrel by 11.18 GMT, after sliding to as low as $113.73. US oil rose 82 cents to $93.95.
Investors are awaiting testimony from US Federal Reserve chairman Ben Bernanke for further clues of whether and at what levels the Fed will maintain its bond-buying stimulus programme.
"The latest US data on employment, manufacturing and inflation suggest that the Federal Reserve will not change direction anytime soon," said David Hufton from PVM brokerage.
Financial markets were rattled last week after minutes of the Fed's January meeting suggested some Fed officials were mulling scaling back its strong monetary stimulus earlier than expected.
"Expectations of further US bank stimulus ahead of Bernanke tomorrow is weakening the dollar against commodities and we are seeing a bit of an uptick," said Michael Hewson, analyst at CMC Markets.
The US dollar index was down 0.32 per cent at 11.32 GMT and the euro was stronger while awaiting the results of Italy's parliamentary election.
Italians finish voting today in one of the most closely watched and unpredictable elections in years, with rising concern that the ballot may not produce a government strong enough to pull Italy from its economic slump.