London: Oil prices rebounded more than $1 to $56 a barrel on Thursday, after a two-day decline, as a weakened dollar and industry spending cuts offset worries of a supply glut.
Analysts at Sucden Financial pointed to a softer dollar boosting buying on Thursday in a note to clients. A weaker US unit makes dollar-priced commodities such as oil cheaper for holders of other currencies.
March Brent futures were up $1.34 at $56 a barrel by 1134 GMT, following a 3 percent loss in the previous session that saw prices break below $54 at one point.
US March crude futures were trading up $1.34 at $50.18, after falling more than 2 percent in the previous session.
Volatility in the oil market has jumped to the highest level since the financial crisis, with prices swinging in a wide range this month following the near 60 percent crash between June and January.
The dollar fell 0.33 percent against a basket of currencies .
"The dollar is weaker against all the commodities at the moment," said Michael Hewson, chief analyst at CMC Markets.
"We saw a heavy selloff in commodities yesterday and I think that's why we're getting a little bit of a rebound in oil prices on the back of that." French oil major Total announced on Thursday that it would increase cuts to operational costs to $1.2 billion this year while spending 30 percent less on exploration, to cope with weaker oil prices.
Traders have been torn between early signs lower prices will eventually curb production and indications the market will remain oversupplied in the first six months of this year.
U.S. crude stocks rose to a record weekly high last week, while gasoline stocks increased and distillate inventories fell, data from the Energy Information Administration showed on Wednesday.
"(The rise in prices) is quite surprising," said Carsten Fritsch, an analyst at Germany's Commerzbank. "Prices have dropped sharply in the last two days so it may be a bounce back from that, but the decline was more than justified." On Wednesday, Saudi Arabia's oil minister met the chairman of Russian state-controlled energy giant Gazprom, Saudi state media said, and discussed cooperation between oil producers belonging to the Organization of the Petroleum Exporting Countries and non-members such as Russia.
Saudi Arabia will keep March crude supply to Asia steady, industry sources told Reuters.
