Oil rallied more than 4 percent on Monday as bargain hunting investors rushed in following a nearly $17 a barrel drop last week.

Trade remained heavy after last week's collapse saw volumes jump to near twice the 30-day moving average as part of a sell off across several commodities markets.

Oil's rebound came amid wider gains across the commodity complex, with the Reuters-Jefferies CRB index <.CRB>, a global benchmark for commodities prices, up rose 1.51 percent, after posting the biggest weekly drop since late 2008 last week.

We went through a pretty hefty sell-off for all markets, said Tony Machacek, an oil trader at Bache Commodities. It smacked of funds getting sell-stops triggered. Now that long liquidation has been done, everything seems to be stabilizing.

Brent crude for June rose $4.36 to $113.49 a barrel by 1 p.m. EDT, well above its earlier $109.05 low.

U.S. crude for June rose $3.62 a barrel to $100.80, having reached $101.49.

Volatility slipped after jumping last week. The Chicago Board Option Exchange's oil volatility index <.OVX> fell 1.31, or 3.16 percent, to 40.13, having slipped after reaching 48.64 on Thursday, the highest in nearly a year.

Further support came from strong gains in U.S. gasoline futures ahead of the U.S. summer driving season. U.S. gasoline futures for June surged 15.40 cents, or nearly than 5 percent, to $3.2441 a gallon and kept the premium to July gasoline at more than 12 cents.

A stout gasoline trade that continues to manifest itself in strengthening RBOB spread inversions is also throwing off bullish vibes, said Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois.

Gasoline crack spreads, or profit margins, reached their highest level since May 2007.

Crude prices came despite a rise in the dollar, which tends to push down prices for dollar-denominated commodities. The dollar index <.DXY> erased early losses after a ratings downgrade for Greece by Standard & Poor's weighed on the euro.

CAUTION

Analysts and traders expressed caution about the rebound in oil, as the much of the political risk that helped drive prices to the highest level since 2008 earlier this year remained.

After such a big fall last week, a bounce by crude prices is to be expected, but the question is whether it will just be a dead-cat bounce, or dead-barrel bounce as I call it, said Phil Flynn, analyst at PFGBest Research in Chicago.

Flynn noted concerns about risk revived by unrest in Egypt and Syria over the weekend.

The euro fell for a fourth straight day, after a strong sell-off last week. Euro zone debt worries continued to mute any bounce in the single currency, particularly after the downgrade of Greece.

Standard and Poor's cut Greece's credit rating further into junk territory, reflecting growing doubts that the euro zone's most fragile economy can manage its debt without imposing losses on private bondholders.

U.S. stocks moved higher as the bounce in commodities lifted energy and materials shares, offsetting concerns over European debt. <.N>

The euro zone problems have bearish implications for dollar-denominated crude prices not only because they pressure the euro and lift the dollar, but because Europe's oil demand may be curbed.

(Additional reporting by Claire Milhench in London and Francis Kan in Singapore; Editing by John Picinich)

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