Prices also rebounded on hopes that the US government's rescue of mortgage firms Freddie Mac and Fannie Mae would prevent a further economic slide.
Traders are also awaiting a decision on production from the oil producers cartel Opec.
Opec is expected to hold current production levels at a meeting in Vienna on Tuesday.
"I don't believe there is any possibility we will change production levels," said Ecuador's oil minister Galo Chiriboga on Sunday.
However, there has been growing speculation that some members such as Venezuela might want to lower output.
Saudi Arabia, Opec's most powerful member, is yet to comment.
Hurricane threat
Oil prices had been falling over the last week. On Friday, the price in New York reached $106.23 a barrel, its lowest level in five months.
Some analysts expect prices to continue to rise, with a number of rigs in the Gulf of Mexico under threat from Hurricane Ike. The rigs produce some 25% of US oil output and supply about 15% of its natural gas.
On Sunday, Hurricane Ike weakened slightly as it approached Cuba. However, US Federal Emergency Management Agency officials predicted it would gain strength as it entered the Gulf of Mexico.
Meanwhile, prices also reacted to the news that the US government would bail-out mortgage lenders Fannie Mae and Freddie Mac.
There had been worries that, were the problems affecting the US mortgage market to worsen significantly, US consumers would face an additional financial burden on top of rising of food and energy costs.
This would have caused them to tighten their belts, reducing demand for oil from motorists, transport firms and factories.
Volatile prices
The recent fall in oil prices had been particularly surprising as earlier this year some Wall Street analysts predicted that oil could climb as high as $250 a barrel.
But a number of factors have led to the drop in oil prices.
Last week the US said it would release 250,000 barrels from its emergency supplies, aimed at easing market concerns and providing liquidity to the market.
Furthermore, the US dollar has rallied recently and rose to an 11-month high against various major currencies last week.
A stronger dollar drives down the price of oil as investors favour the US currency over assets such as oil.
