Oil rebounded above $90 a barrel on Friday after hitting an 18-month low but remained on course for a weekly loss of nearly 8 percent as reports suggesting slowing economic growth around the globe signalled weaker demand.
A downgrade of the credit ratings of 15 of the world's biggest banks by ratings agency Moody's to reflect the risk of losses they face from volatile capital markets activities also weighed on commodities and equities.
Brent crude fell to $88.49, the lowest since December 2010, before reversing course to trade at $90.18, up 95 cents, at 1139 GMT.
U.S. crude was up 41 cents at $78.61, after a 4 percent drop on Thursday.
"It has been a long fall, driven by global economic slowdown and oil fundamentals such as weaker demand from China," said Tony Machacek, oil futures broker at Jefferies Bache.
"Technical indicators show the market is a little bit oversold, so there could be some short-covering around."
A closely watched technical indicator, the relative strength index, for Brent has dropped to 18, suggesting prices are oversold and a rebound may be due. But in general, the technical picture contains few bright spots, said one analyst.
"The daily and weekly charts are just terrible," said Olivier Jakob of Petromatrix. "If Brent wants to maintain some hope for next week it needs to at least regain $90 for today's close."
The price of Brent has fallen by 7.7 percent this week and has slid by about 30 percent from its 2012 high of $128.40 reached in March. The weekly drop is on course to be the biggest since the week to June 3.
"It is not surprising to see an intra-day bounce, but I don't expect this to last," said Carsten Fritsch, analyst at Commerzbank. "The general direction is still to the downside. It seems we are now in a broad-based global economic slowdown."
Reports this week showed U.S. factory output grew at its slowest pace in 11 months in June, business activity across the euro zone shrank for a fifth straight month and Chinese manufacturing contracted for an eighth month.
As the economic outlook darkens, oil supply is ample. The Organization of the Petroleum Exporting Countries is pumping about 1.6 million barrels per day (bpd) more than the demand for its oil and its own supply target, Opec figures show.
Much of the extra oil has come from top exporter Saudi Arabia, which made clear it was unhappy with the surge in prices earlier this year, as well as from an export capacity expansion in Iraq and a recovery in Libyan output.
Opec agreed at a meeting last week to keep its oil output limit at 30 million bpd, and several in the group called on Saudi to cut back supplies to bring collective output down to the target level.
There are signs of lower Saudi output already. Saudi Arabia told Opec it trimmed output in May to 9.8 million bpd from 10.1 million bpd - the highest in decades - in April.
"We are heading for a weak third and fourth quarter, so prices could go a lot weaker," said Leo Drollas, chief economist at the Centre for Global Energy Studies. "The Saudis at the end of the day will have to cut back themselves."
The leaders of Germany, France, Italy and Spain will meet in Rome later in the day in an attempt to restore confidence in the euro zone ahead of an EU summit in Brussels next week.
Friday's meeting will look for ways to achieve fiscal and banking union in the euro zone and, more urgently, it may also be the occasion for Spain to formally request assistance of up to 100 billion euros for its struggling banks.