Oil prices soared on Monday as fears of a worldwide recession were overshadowed by concerns of a short supply because of lower OPEC output, unrest in Libya, and sanctions against Russia.

Futures contracts for August delivery of U.S. West Texas Intermediate (WTI) crude rose 44 cents, or 0.4%, to $108.87 a barrel after losing $1 earlier.

Brent crude futures for September climbed 55 cents, or 0.5%, to $112.18 per barrel at 06:50 GMT, after plunging more than $1 in early trading.

"The fundamentals of oil remain favorable. Strong time spreads indicate a tight market, and it is evident that OPEC is still failing to meet its output targets," said ING's head of commodity research, Warren Patterson.

The group appears to be struggling to sustain its present output levels, since production decreased in June, he said.

The National Oil Corp. reported last week that Libya's exports have decreased to between 365,000 bpd and 409,000 bpd, a decrease of approximately 865,000 bpd compared to normal levels.

In June, production from the 10 members of the Organization of the Petroleum Exporting Countries (OPEC) decreased by 100,000 barrels per day (bpd) to 28.52 million bpd, compared to their pledged increase of 275,000 bpd.

ANZ Research analysts stated in a note that the likelihood of OPEC meeting its newly increased production quotas is even less likely due to declines in Nigeria and Libya, which were offset by increases in Saudi Arabia and other large producers, and further supply disruptions in Libya due to escalating political unrest.

A planned strike by Norwegian oil and gas employees this week might reduce the country's oil and condensate output by 130,000 barrels per day (bpd).

Tina Teng, an analyst at CMC Markets, believes that fears of a worldwide recession will curb oil's price gains.

While the capacity of U.S. petroleum refineries has expanded, rising interest rates and a drop in consumer confidence have weakened the forecast for gasoline demand, she said.

In addition, a strong U.S. dollar hurts commodities markets in general, particularly crude oil prices.

Despite a modest improvement in the inflation forecast, consumer morale in the United States reached an all-time low in June, as the Federal Reserve stated that its commitment to containing inflation was "unconditional" and as fears of interest rate hikes grew.

The official pricing for August from the world's leading oil exporter, Saudi Arabia, will be closely monitored by traders for indications of market tightness, with refiners preparing for another steep hike close to the record set in May.