Prices rose as Europe moved closer to pumping aid to the region’s troubled banks and US data showed jobless benefit claims rose less than expected last week.
Trading was volatile, with prices falling early after the European Central Bank left interest rates unchanged and the bank’s chief warned of more regional economic risks.
Then oil futures marched higher as investors waded back into riskier assets, helping lift global equities and major commodities such as copper, which rose to a week’s high.
Worries about Europe’s sovereign debt crisis, a drag on commodities and equities, eased when European Commission President Jose Manuel Barroso said the EU’s top executive body proposed a coordinated recapitalization of banks.
Markets were further bolstered after German Chancellor Angela Markel said Europe should not hesitate to recapitalize its banks if this prevents greater economic damage.
New claims for US unemployment benefits rose less than expected last week, feeding hopes for an improved labor market on the eve of the September non-farm payrolls report.
“The markets are looking to embrace even the slightest improvement in the economy,” said John Kilduff, a partner at hedge fund Again Capital in New York.
Friday’s jobs report, an early indicator of how the economy fared last month, was forecast to show that nonfarm payrolls likely added 60,000 after being flat in August and that the unemployment rate remained steady at 9.1 percent.
By 12:55 p.m. EDT, (1455 GMT), Brent crude futures for November delivery rose $1.10 to $103.83 a barrel, climbing from an intraday low of $101.53. US crude gained $1.61 to $81.29.
Trading volume on Brent crude was around 455,000 contracts, 17 percent below its 30-day average and topping US crude, which traded around 452,000 contracts, 29 percent below its 30-day average.
“Given the uncertain prospects for the global economy and eurozone debt issue, it’s not unusual for some pullback in oil after making some substantial gains,” Victor Shum, an analyst at energy consultants Purvin and Gertz, said.
US crude stockpiles dived 4.7 million barrels last week, compared with analyst forecasts for a rise of 700,000 barrels.
“This occurred primarily because crude imports were much lower, more than compensating for the slight drop in refinery utilization,” Commerzbank analyst Carsten Fritsch said.
He said that “more pressing factors such as the general mood on the financial markets and economic expectations have been and remain more important” for oil.
“In view of the prevailing threats to the economy, it is unlikely that the drop in inventories ... will have any lasting impact on oil prices.
“Once concern about the economy gains the upper hand again, oil should come under renewed pressure. Consequently, the US labor market data due out (Friday) and the continuing euro debt crisis can be expected to have more influence than the inventory data,” Fritsch said.
Despite the day’s sharp gains analysts saw more downside risk for crude futures, given economic weakness in the US and the debt crisis in the euro zone.
Also, with some of the oil production curbed by the war in Libya and interruptions in the North Sea and Nigeria was now finding its way back into the market, the supply fundamentals for oil are “pretty strong right now,” Exxon Mobil Chief Executive Rex Tillerson said at the Washington Ideas Forum.
