Brent crude rose towards $108 a barrel on Friday after posting its biggest daily percentage drop in six months in the previous session, although expectations for a rise in Libyan supply and speculation of a build up in U.S. stockpiles capped gains.
A rebalancing of commodity portfolios by asset managers also added to the volatility in oil prices.
Brent rose 21 cents to $107.99 by 0339 GMT after a 2.7 percent drop on Thursday, the largest since late June.
U.S. crude hit a one-month low of $95.27, down 17 cents, after posting its biggest daily fall since November 2012.
"The strong inventories decline that we had in recent weeks are very likely linked to tax management at year-end than true underlying strength in demand," said Mark Keenan, head of commodities research in Asia at Societe Generale, referring to U.S. crude stocks.
"There's been talk about how over the next few weeks there's going to be some heavy inventory builds."
A report by industry group Genscape showed a one million barrel rise in stockpiles at Cushing, Oklahoma, the benchmark delivery point for U.S. oil futures.
The United States could also tighten regulations on crude-by-rail shipments after an explosion in North Dakota on Monday. This may lead to higher transportation costs and create supply gluts that could depress U.S. crude prices, Phillip Futures analyst Tan Cheet Tat said.
Analysts however expect official U.S. weekly data, to be released later on Friday, to show a fifth consecutive draw in nationwide crude inventories.
Copyright: Thomson Reuters 2013
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