Oil rebounds, remains above $95 a barrel

Oil prices staged a moderate rebound Friday, a day after their sharpest drop in more than seven months.

By early afternoon in Europe, benchmark oil for August delivery was up 41 cents to $95.55 a barrel in electronic trading on the New York Mercantile Exchange.

On Thursday, the expiring Nymex contract for July settlement sank $2.84, or 2.9 percent, to $95.40 a barrel. The sharp drop was precipitated by weak Chinese manufacturing data and signals that the U.S. central bank is preparing to scale back its stimulus policies.

Thursday's "events mean that oil shed all of the gains of the past two weeks, showing just how susceptible the oil market is to external influences," said a report from Commerzbank in Frankfurt. "There has after all been no change in the fundamentals since the beginning of the month."

Analysts said rising crude output combined with the Fed's signal that it would start tapering down its asset purchases this year have put downward pressure on oil prices. But Syria's civil war and Iran's pursuit of nuclear projects were risks that had the potential to disrupt energy markets and could cause prices to rise.

"The geopolitical premium must not be forgotten, and may not remain muted for long," said analysts at Credit Agricole CIB in Hong Kong.

On Wednesday, Fed chairman Ben Bernanke suggested that he was optimistic about the U.S. economy — and that the Fed might start scaling back its massive $85 billion-a-month bond-buying program this year if conditions continue to improve. The Fed could end the program by the middle of next year, Bernanke said.

The Fed program has kept borrowing costs near historic lows for consumers and business. It has also helped boost the equities and energy markets.

Brent crude, a benchmark for many international oil varieties, was up 52 cents to $102.67. Brent plunged $3.97, or 3.7 percent, to end on Thursday at $102.94 a barrel on the ICE Futures exchange in London.

In other energy futures trading on the Nymex:

— Wholesale gasoline rose 1.57 cents to $2.7932 a gallon.

— Heating oil added 1.52 cents to $2.8882 per gallon.

— Natural gas advanced 1.3 cents to $3.89 per 1,000 cubic feet.

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Pamela Sampson in Bangkok contributed to this report.