Oil rebounded from an early three-and-a-half year low below $49 a barrel on Friday, tracking Asian equities that bounced back on rumours that China may cut interest rates later in the day.

Still, its 12 per cent fall so far this week took oil close to a $100 drop from its July record high and set it on course for the steepest weekly decline since the week of October 6.

US light crude for January delivery rose 64 cents to $50.06 a barrel at 0622 GMT, its first increase after five straight sessions of losses. Earlier it fell to $48.25, the lowest in three and a half years.

London Brent crude gained 92 cents to $49.00 a barrel.

Asian stock markets rebounded from a five-year low touched earlier on Friday as a variety of rumours, such as China cutting interest rates later in the day, prompted investors to cover short positions before the weekend.

Earlier, Asian stocks had plummeted, tracking US stocks that hit their lowest in a decade the previous session as the fate of the country's major car makers continued to hang in the balance.

"The economy is pulling everything down like a black hole," said Anthony Nunan, risk management executive at Tokyo-based Mitsubishi Corp. "Until the economy stabilises, it will be hard for oil to put in a bottom."

Oil has lost two thirds of its value in just under four months since peaking above $147 in July as the financial crisis grips economies around the globe and limits demand for fuel.

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