Oil rises to near $87 after 7 percent weekly fall

By early afternoon in Europe, benchmark crude for December delivery was up 96 cents to $86.69 a barrel in electronic trading on the New York Mercantile Exchange.

On Wednesday, the contract dropped 94 cents, or about 1 percent, to finish at $85.73 per barrel after the U.S. reported an unexpectedly large increase in crude supplies.

The Energy Department said U.S. oil supplies grew last week by 5.9 million barrels, or 1.6 percent. At 375.1 million barrels, the nation's oil inventory is 11.1 percent above year-ago levels.

"The release of the weekly EIA oil inventories report surprised the markets, raising serious concerns about the levels of the oil demand," said a report from Sucden Financial Research in London.

Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne, said traders were seeing an opportunity for bargains after recent price plunges. The oil price has dropped almost 7 percent since closing last Thursday at $92.10.