LONDON – Stocks recovered their poise Friday following the previous day’s sharp drop in oil prices on speculation that Saudi Arabia would be willing to make up for any shortfall in crude production from Libya.

The catalyst to Thursday’s decline in oil prices was the expectation that Saudi Arabia, the world’s biggest crude exporter, could pump more oil out to make up for lost supplies from Libya, which is effectively split into two after a favourite uprising.

In normal circumstances, Libya produces about 1.6 million barrels of crude per day, but its output has been heavily impacted by the violence that has caused almost 300 deaths, according to a partial count by Human Rights Watch.

In London, a barrel of Brent crude was up 76 cents at $112.14 a barrel, still $7 below its high point on Thursday. Meanwhile, the equivalent New York rate was up 37 cents at $97.65 a barrel, again around $5 down from the previous day’s peak.

The knock-on effect on stocks has been positive as investors breathe a sigh of relief that the current sharp rise in oil prices has come to a halt, however briefly — the fear is that sky-high oil prices will choke the fragile economic recovery around the world.

In Europe, Germany’s DAX was up 0.6 percent at 7,169 while the CAC-40 in Paris rose 1.2 percent to 4,055. Britain’s FTSE 100 index of leading British shares was up only 0.2 percent at 5,934.39 though trading was halted soon after the opening after another technical glitch.

Wall Street was poised for a evenhandedly solid opening, too — Dow futures were up 61 points at 12,098 while the broader Standard & Poor’s 500 futures rose 7.7 points to 1,310.40.

Libya was likely to continue to dominate sentiment as the trading week comes to a nervous end.

With reports indicating an escalation in the violence in and around the capital city of Tripoli, now that big parts of the country are in the control of opposition groups, there are fears that longtime leader Moammar Gadhafi might be preparing for a final and bloody showdown.

This year the longtime leaders of Tunisia and Egypt have already had to quit following big favourite uprisings.

The biggest worry in the markets is not Libya but whether the crisis spreads through the Persian Gulf’s larger energy producers. Already Bahrain’s government is covering regular protests and there are fears that Saudi Arabia’s royal family might be next in line to grappling the wrath of its people. The declaration of a big $36 billion package of benefits early this week was seen as an attempt by King Abdullah to assist favourite discontent.

“If the political unrest was to spread to the world’s largest oil producer, markets would have to discuss the possibility of a new oil crisis and its consequences for the global economy,” stated Ashley Davies, an analyst at Commerzbank.

If the crisis spreads there, experts state oil prices could reach $200 a barrel, potentially tipping the world economy back into recession.

The fragility of the global recovery was evidenced by the fact that Britain contracted by a greater than anticipated 0.6 percent in the final three months of 2010. Though the heavy snow in December was the main reason behind the contraction, the figures underlined how vulnerable the economy could be to even higher energy prices and interest rates.

The news that the contraction was greater than the initial 0.5 percent estimate hit the pound, sending the currency 0.4 percent lower against the dollar, while the euro rose 0.2 percent to 0.8574 pound.

Elsewhere, the euro was 0.2 percent lower at $1.3783 and the dollar 0.1 percent down at 81.87 yen.

In Asia, Japan’s Nikkei 225 stock average rose 0.7 percent to close at 10,526.76 and South Korea’s Kospi also added 0.7 percent, to 1,963.43. Hong Kong’s Hang Seng index jumped 1.8 percent to 23,012.37.

The benchmark Shanghai Composite Index was virtually unchanged at 2,878.57, and down 0.7 percent for the week, while the Shenzhen Composite Index edged up less than 0.1 percent to 1,280.30 in dull trading.

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Pamela Sampson in port contributed to this report.