An oil rig is shown in this file photo.

World oil prices rebounded Friday, reversing earlier losses, as traders speculated that the Chinese government could implement more stimulus measures to combat weaker economic growth.

Brent North Sea crude for delivery in August rallied $1.16 to $102.23 per barrel in late morning deals in London.

New York's main contract, light sweet crude for August, jumped 74 cents to $86.82.

Oil prices had fallen in earlier Asian trade after news that economic growth in China, the world's largest energy consumer, slowed to its lowest level in three years during the second quarter.

However, the market then rebounded on mounting speculation that the Chinese government could be spurred into action.

China grew 7.6 percent in the second quarter year-on-year, the slowest rate since the world's second-largest economy expanded by 6.6 percent during the depths of the global financial crisis at the start of 2009.

“Following the Chinese data ... with (economic) indicators broadly near pre-crisis stimulus levels, crude prices are firming nicely today in tandem with metals, on hopes the Chinese government may implement further policy action,” said Sucden analyst Jack Pollard.

“The China stimulus story looks all the more apparent, boosting commodities, as European equities remain mixed, peripheral (eurozone government bonds) sell off and the euro struggles to pare the week's losses.

“Thus, there's little support coming from elsewhere in Europe following last night's downgrade of Italy by Moody's.”

Prices also found fresh support on the back of fresh US sanctions on key oil producer Iran.

“Moves by the US to increase sanctions on Iran are underpinning Brent,” said Pollard.

The United States unleashed a fresh wave of sanctions against Iran on Thursday, ratcheting up pressure to convince Tehran to take seriously concerns about its suspected nuclear weapons program.

The actions impose additional sanctions on Iran's nuclear and ballistic missile proliferation networks and identify Iranian “front” companies and banks to assist in compliance, the US Treasury Department said.

Oil prices see-sawed this week as traders tracked global economic growth concerns and supply-side worries.

“Oil has been reluctant to push above $100 for much of this week as bearish demand amid slowing world economies has outweighed concerns over supply disruptions,” noted analyst Tom Pering at energy consultancy Inenco.

“This was particularly true after the Norwegian strike was ended by the government.

“However, Chinese (data) reassured investors. With the eurozone debt crisis still rumbling on and the short-term bulls (who are betting on higher prices) currently in control of the market, I expect (Brent) oil to remain within a tight range of $99-103 per barrel over the coming week.” - Sapa-AFP