Brent crude oil steadied around $114 per barrel yesterday on hopes new governments in Italy and Greece would prevent their economies from collapsing and help avoid financial meltdown in the Eurozone, offering the chance of renewed growth.
Risk appetite improved with stock markets stabilising, commodities rising and credit spreads tightening.
Brent crude was down 40 cents at $113.76 per barrel by 1106 GMT. US crude traded 60 cents lower at $98.39, after touching $99.69, its highest since July.
"Markets are optimistic that the critical deadlock is over and that something will be done to solve the Eurozone debt crisis," said Carsten Fritsch, commodities analyst at Commerzbank in Frankfurt. "In the short-term it is possible that the market will take another leg higher."
Oil prices have rallied strongly over the last month with the US benchmark rebounding from a 2011 low of $74.95 on October 4. Brent dipped below $100 per barrel on that day.
On Friday, the US crude oil benchmark closed at a 15-week high, posting a sixth consecutive weekly gain, while Brent pushed higher for a third straight week.
The spread between Brent and US crude has narrowed to around $15.50, from more than $28 in mid October, as output has improved in the North Sea and Libya.
Reuters technical anal-yst Wang Tao says Brent is likely to fall in the short term, dropping to $111.30 per barrel, a low touched on November 10, while US oil may either hover around strong resistance at $98.91 or retrace to $97.
Oil prices have performed more strongly than equities over the last two months, weakening a correlation that has been strong this year and suggesting market fundamentals are tight.