Oil bounces off lows in a gas and products-led recovery

By Santosh Menon

LONDON (Reuters) - Oil rebounded from early lows to stand near $128 a barrel on Monday, as a rally in natural gas and refined oil products helped outweigh demand concerns and a firmer dollar.

U.S. light, sweet crude oil futures rose $1.05 to $128.40 a barrel by 4:27 p.m. British time, off session lows of $125.22.

London Brent rose 69 cents to $128.47.

Traders said the recovery in crude was led by gas, heating oil and gasoline. Investors, especially speculators, with oversold positions were also coming back into the market, they said.

Nymex natural gas futures was nearly 4 percent higher, while heating oil and gasoline were up nearly 1.5 percent and 1.3 percent higher.

Oil fell nearly $5 lower last week as investors booked profits after rallying to a record high above $135.

The recovery in crude came despite a firmer dollar, which edged up against the euro on Monday after a survey showed stronger-than-expected U.S. manufacturing activity in May.

The dollar has rebounded against the euro on the prospect of the Federal Reserve eventually lifting rates. The dollar scored back-to-back monthly gains against the euro in April and May for the first time since early 2007. <USD/>