Later New York's main oil contract, light sweet crude for August delivery, rose 51 cents to 129.80 a barrel still short of the 130 mark.

Prices have crumbled since striking record highs above 147 dollars a week ago.

Analysts say the surprise rise in reserves indicated record oil prices are having an impact on energy demand in a US economy that is already weak.

New York's main oil contract, light sweet crude for August delivery, rose 51 cents to USD 129.80 a barrel.

The contract lost USD 5.31 to close at USD 129.29 a barrel yesterday at the New York Mercantile exchange, after similar plunges the previous two days.

Brent North Sea oil for September delivery rose 34 cents to USD 131.41 after a drop of USD 5.12 to USD 131.07 on Thursday in London.

"What we are seeing is a bounce back after very sharp falls," said David Moore, a Sydney-based commodity strategist with the Commonwealth Bank of Australia.

Prices have crumbled since striking record highs above USD 147 one week ago.

Wednesday's price fall was largely driven by an unexpected weekly rise in US oil and gasoline inventories, according to Barclays Capital analyst David Woo.

US government data showed US inventories rose by 3.0 million barrels to 296.9 million barrels in the week ending July 11, confounding market expectations of a decline of 2.2 million barrels.

Analysts say the surprise rise in reserves indicated record oil prices are having an impact on energy demand in a US economy that is already weak.

The United States is the world's biggest energy consumer. Government data showed American consumption of petroleum products fell two per cent over the past four weeks, compared with the same period a year ago, analysts said.

Meanwhile, the BSE-30 share index, Sensex, which had gained 536.05 on Thursday, gathered another 162.87 points to 13,274.72.

Similarly, the wide-based National Stock Exchange's Nifty gained 43.80 points to 3,991.00.

Stock brokers said a marginal rise in the inflation, which inched up to 11.91 per cent for the week ended 5th July from 11.89 per cent in the previous week, failed to give any impact on the trading sentiments.

They said firm trends in global markets after crude oil prices declined further influenced the sentiments in Mumbai.

The Hong Kong's Hang Seng index opened up 0.7 per cent.

Major gainers, which supported the Sensex were Larsen and Toubro, HDFC Ltd, HDFC Bank, ICICI Bank, State Bank of India, Mahindra and Mahindra, DLF Ltd and Reliance Petroleum.

Source: By DDNEWS