Oil bounced back from seven-week lows on Monday as hopes rose of stronger action to solve the euro zone crisis and avert wider financial contangion and global recession.

European shares gained , while gold and copper , which had both tumbled more than 5 percent in early trade, pared losses.

"These are very critical days and weeks ahead, reminiscent very much of the touch-and-go situation we were in back in 2008," Edward Meir, senior commodities analyst at brokers MF Global said. "The key difference this time around is that it is countries and not companies that are in danger of going bust."

Brent futures for November <LCOc1> fell $2.31 to a low of $101.66 a barrel, the lowest intra-day level for the front-month contract since Aug. 9, but then recovered to trade around $104.30 by 0915 GMT.

U.S. crude <CLc1> lost $2.74 to reach a low of $77.11 per barrel, after rising more than a dollar earlier. It had recovered to trade around $79.50 by 0915 GMT, down 35 cents.

Brent plunged 7.35 percent last week in its biggest loss since May 6. So far in September, Brent is down 9 percent.

World stocks fell towards 14-month lows early on Monday but then recovered while the euro backed off from a 10-year low against the yen.

The market took heart from reports European leaders were seeking new ways to solve the region's debt problems.

After a weekend of being told by the United States, China and other countries that they must get more aggressive in their crisis response, European officials focused on ways to beef up their existing 440 billion-euro rescue fund.

"PRICED IN"

"The market has come down a long way and most of the bad news seems now to be priced in," said Christopher Bellew, oil broker at Jefferies Bache. "Equities have stabilised."

"I think that the possibility of a Greek default is being addressed. There is a chance that the market won't fall much further, at least for a while."

The dollar slipped around 0.2 percent against a basket of currencies, helping support oil prices.

Greece, the epicentre of the euro cris crisis, is trying to secure its latest wad of cash from international lenders including the IMF next month to avoid a default.

The IMF said on Sunday its inspectors would probably return to Athens this week after getting written assurances on a new wave of austerity measures announced by Greece to resolve a debt crisis shaking the euro.

In the oil-producing Middle East, political unrest continues as Yemeni President Ali Abdullah Saleh made no pledge on Sunday to step down in his first address to the nation since returning home, calling for early elections in a move unlikely to appease protesters demanding his immediate departure.

In Libya, senior members of the country's ruling National Transitional Council (NTC) are leaning towards putting on hold plans for a new caretaker government because they cannot agree on a line-up, a source close to the council told Reuters. (Additional reporting by Francis Kan in Singapore; editing by William Hardy)