LONDON: Oil trimmed gains in choppy trading on Tuesday as the gloomy outlook for global economy came into focus once again, following the warning from International Monetary Fund (IMF).
Brent crude was $1.15 up at $110.29 a barrel by 1402 GMT. Earlier, it rose to as high as $110.99 a barrel.
US crude for October turned briefly negative and it was trading 41 cents up at $86.11. Volume was relatively thin ahead of the contract expiry later on Tuesday. The more actively traded November contract was at $86.84.
"Oil is capping some of the earlier gains today after the IMF has cut their world growth forecast — lower world growth means lower demand for oil," Thorbjørn Bak Jensen, oil analyst with Global Risk Management in Copenhagen, said.
Europe and the United States could slip back into recession next year unless they quickly tackle economic problems that could infect the rest of the world, the IMF said on Tuesday, cutting its growth forecast for the world economy.
Financial volatility had increased dramatically as investors worried about an escalating debt crisis in the euro zone and a weakening U.S. recovery, the IMF said.
Earlier in the day, oil prices rose in response to the sharp falls in the previous two sessions.
Prices had extended gains on the news that Greece, still in the centre stage of Europe’s debt crisis, fully paid two bond coupons amounting to 769 million euros ($1.04 billion) that came due on Tuesday.
Refinery outages
Some bearish factors came from the European oil refining sector and Libya, said Christopher Bellew, broker with Jefferies Bache.
"Refinery turnaround have been causing some weakens in North Sea oil prices and Libyan oil seems to be coming back faster than expected," Bellew said.
Libya, a member of producer group OPEC, resumed oil production at some oilfields earlier in September and a limited volume has been offered for export.
Qatar, the smallest member of OPEC, said it was too early to say whether the group would trim production as Libya gets back on its feet.
The comment followed remarks by OPEC Secretary General Abdullah Al-Badri that producers who had increased output to make up for the shortfall from Libya will reduce production as Libya gradually comes back online.
Ahead of the release of two sets of US weekly oil data, analysts forecast on average that crude stocks would be down 1.3 million barrels for the week ended Sept. 16.
Industry group American Petroleum Institute (API) and the US Energy Information Administration (EIA) will release figures on Tuesday and Wednesday, respectively. –Additional reporting by Manash Goswami in Singapore
