Oil prices hovered above $94 a barrel Monday, shuffling between optimism about progress on the European Union-led bailout package for Greece and concerns about similar problems coming to the fore in Italy.
By early afternoon in Europe, benchmark crude for December delivery was up 40 cents at $94.66 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 19 cents to settle at $94.26 in New York on Friday.
In London, Brent crude was up 87 cents at $112.84 a barrel on the ICE Futures exchange.
Greece's embattled prime minister and main opposition leader agreed Sunday to form an interim government to ensure the country's new European debt deal, capping a week of political turmoil that saw Greece face a catastrophic default that threatened its euro membership and roiled international markets.
Prime Minister George Papandreou also agreed to step down halfway through his four-year term. Any interim government that is formed with the support of both major parties will be almost guaranteed to push the European rescue package through parliament, which would provide Greece with an additional $179 billion (euro 130 billion) in rescue loans and bank support.
"In the near term, the fact that the Greece crisis has eased somewhat speaks against the price of oil falling provided there is no more bad news from Europe," said analysts at Commerzbank in Frankfurt.
Crude has jumped about 25 percent from $75 on Oct. 4 amid growing investor optimism that Europe will be able to at least temporarily contain its sovereign debt crisis. However, some analysts say the crisis has already undermined economic growth and are concerned that Italy's debt burden could soon spell trouble.
"Unemployment both in the US and in Europe remains very high and in Europe the combination of greater austerity measures and still very high energy prices will not be a good mix for the economy," said analyst Olivier Jakob of Petromatrix in Switzerland. "Greece will continue to attract the attention but ... we are already past the Greek crisis and we have started to enter the Italian crisis."
On Monday, the yield on Italy's 10-year bonds rose to its highest level since the euro was established in 1999. Pressure is increasing on Prime Minister Silvio Berlusconi to resign and make way for a new government which could be more effective in pushing through economic reforms.
Investors will also get guidance from this week's releases of the latest monthly energy forecasts from the U.S. Energy Information Administration on Tuesday and OPEC, as well as the International Energy Agency's annual supply and demand projections, on Wednesday.
"Given the gloomier economic outlook, another downward revision of demand estimates cannot be ruled out," Commerzbank noted.
In other Nymex trading, heating oil rose 2.79 cents to $3.0986 per gallon and gasoline futures jumped 3.15 cents to $2.6949 per gallon. Natural gas lost 4.3 cents at $3.74 per 1,000 cubic feet.
Alex Kennedy in Singapore contributed to this report.
Copyright 2011 The Associated Press.