Oil resumed gains above $87 on Monday, bouncing from the earlier losses, as the International Energy Agency said oil prices would exceed $100 a barrel in the next five years.
By 1037 GMT, US crude oil futures rose 25 cents to $87,30 a barrel, having fallen to as low as $86,44. ICE Brent was trading 21 cents higher at $88,67.
US crude hit a two-year high of $87,49 on Monday.
Oil reversed course following the release of the IEA's long-term energy outlook, in which the Paris-based agency said oil prices might exceed $100 a barrel in 2015 and $200 in 2035.
Analysts said the $100 mark provided a clear price target for investors, but return on investments might not be dramatic.
"That $100 per barrel is four-five years away. It is not much support to oil prices," Olivier Jakob with Petromatrix said.
"If you take into account the contango structure and so forth, it does not give you much return."
The IEA also cut its 2035 oil demand outlook by 6 million barrels per day (bpd) to 99 million bpd from its estimate a year earlier.
Analysts also pointed out gains might be limited by a stronger dollar against the euro due to renewed concern about debt in Europe and an expected rise in US oil inventories.
"The top end of prices will be weighed by renewed concerns over sovereign debts in Europe, while crude prices would move with a solid floor due to money inflows into risky assets following the further easing (in the United States)," analysts with Mizuho Corporate Bank in Tokyo said in a research note.
"Ahead of the (US government) oil inventory data tomorrow narrow range price movements is likely today."
Ireland is the latest country to rattle the euro, with Irish borrowing costs extending a month-long climb on worries about a political impasse in Dublin ahead of a budget vote.
The euro extended losses against the dollar and the Japanese yen.
Wider commodities markets rallied due to risk appetite on the back of US Federal Reserve's decision last week to inject $600bn to spur a flagging recovery, referred as the QE2, and the market anticipation prior to the decision.
Gold added to a record breaking run, hitting a new high above $1 400 an ounce as investors sought safe havens in the face of a number of uncertainties including euro zone debt worries and amid this week's G20 leadership summit in Seoul.
US crude inventories probably increased by 1,4 million barrels in the week to Nov. 5 as imports rebounded, a Reuters poll of analysts showed on Monday.
The American Petroleum Institute will issue its oil stocks report on Tuesday at 2130 GMT, followed by the US Energy Information Administration's (EIA) government data on Wednesday.
The analysts in the poll forecast a drawdown of 1,8 million barrels for middle distillate inventories, which includes heating oil and diesel, down for the seventh consecutive week, while gasoline stocks fell 1 million barrels.
The US EIA will release its outlook for 2011 oil consumption in the United States and the world later in the day.
Analysts expect the EIA to increase its forecast for next year.