Brent futures rose towards $98 on Friday, extending gains after producer group OPEC agreed to keep its output target unchanged for the second half of the year, although uncertainty surrounding Europe's debt crisis capped further advances.
The OPEC deal to retain the output limit at 30 million barrels a day implies a cut in supply of 1.6 million bpd. Oil is also drawing support from news that major central banks stand ready to take steps to stabilize financial markets if cliffhanger Greek elections on Sunday result in turmoil.
Brent crude had gained 76 cents to $97.93 a barrel by 0451 GMT. US crude rose 69 cents to $84.60 a barrel, after settling $1.29 higher.
"That news is giving some comfort to the market that there will be coordinated action if it is required," said Ken Hasegawa, a commodity sales manager at Newedge Japan. "That is why we are seeing gains in prices today."
Brent is poised to fall 1.4 percent this week, declining for six out of the last seven. The US contract is set to rise 0.6 percent in its second straight week of gains, coming back from losses made in the previous five.
The European benchmark may trade in a wide range between $95 and $105 over the next few days and US crude around $80 to $90, as investors try to assess the future of the eurozone and the broader impact it may have on the global economy, Hasegawa said.
Analysts at ANZ said in a report they expect the US benchmark to trade in a range from $80 to $87 in the near term, with a downside bias for the contract to break below $80.
"That view, however, would be negated by a clear, pro-bailout victory in Greece, which we think could ignite a relief rally," the ANZ analysts said.
Oil prices have dropped from a $128 peak for Brent in March, and from $110 for US crude, in part because the economic outlook has darkened, but also because of increased Saudi output that in April set a 30-year high of 10.1 million bpd.
To stem a further slide in prices, several in the Organization of the Petroleum Exporting Countries called on Saudi Arabia to cut back to bring collective supply down to the 30 million bpd limit to defend a $100-a-barrel price.
Extra oil from Saudi Arabia has been largely responsible for lifting actual OPEC output to 31.6 million bpd.
Raising output was a deliberate move by Riyadh to counter the possibility that Iranian oil output would fall heavily when a European Union embargo on Tehran starts next month. Iranian production is already down to a 20-year low.
Gains in oil prices were capped, however, as investors remained cautious ahead of the outcome of the Greek elections. A victory for parties opposed to the austerity terms may raise the chances of the country exiting the euro, plunging the region into a deeper crisis and hurting oil demand growth.
"It is not just the Greek elections results," said Hasegawa. "The important matter is how the next government will handle the country's debt crisis. A lot of money may get pulled out of the markets, not just oil, but overall commodities if the crisis worsens."
Policymakers and investors are worried that if Greece moves out of the zone, it could trigger another global financial market meltdown similar to the one that followed the collapse of Lehman Brothers in 2008.
To tackle any severe strains, central banks from major economies have said they stand ready to take steps to stabilise financial markets and prevent a credit squeeze.
That helped Asian shares and base metals edge up on Friday, while the euro held firm.
Gains were also capped as data showed new claims for US state jobless benefits rose for the fifth time in six weeks, indicating the economy of the world's top oil consumer remains fragile.