While US crude did not completely shake off morning selling, Brent climbed back above $114 a barrel, after extending losses earlier following the release of US government data that showed a build in oil inventories in the week to Dec. 30, countering forecasts that refiners had cut stockpiles for year-end tax purposes.

"The market is focused on what is going on in the Middle East and little else and may be poised to break out from here," said Richard Ilczyszyn, chief market strategist and founder of iitrader.com in Chicago.

After European Union leaders agreed to halt purchases of Iranian crude to pressure Tehran on its nuclear program, Iran faced the prospect of cutbacks in its oil sales to China and Japan that would further threaten its economy.

Iran had threatened to halt shipping through the Strait of Hormuz if faced with greater sanctions, supporting crude prices in recent weeks. The United States has said it would counter any attempts to block the waterway and Saudi Arabia has pledged to increase output in case of a sudden supply cut.

By 12:45 p.m. EST (1745 GMT), ICE Brent crude futures traded in London up 34 cents at $114.04 a barrel, bouncing off the session low of $112.58. 

US crude, which is less influenced than Brent by international developments and more by domestic oil inventories, was down 24 cents at $102.98, after falling to a session low of $101.95.

Brent's premium against US crude widened to above $11 after closing at $10.48 on Wednesday.

Brent's trading volume rose almost 12 percent against its 30-day average, according to Reuters data. US crude volume lagged and was down 25 percent from its 30-day average. 

Nigerian trade unions threatened to call a national strike and shut down large parts of the country's oil industry from next week if the government failed to restore a scrapped fuel subsidy, supportive for oil prices.

News that lenders to Swiss oil refiner Petroplus had extended the freeze on its borrowing to all credit lines on top of $1 billion choked off last week also added support for Brent.

Countering all this, US crude stockpiles rose by 2.21 million barrels last week, against forecasts for a modest 200,000-barrel drawdown. Distillate and gasoline stocks increased more than expected.