Oil rose above $70 a barrel on Thursday, retrieving some of the previous session's losses, supported by signs of global economic recovery and a weaker U.S. dollar.
Oil dropped almost 2 percent on Wednesday after U.S. government data showed a larger-than-expected build in gasoline and distillate stocks last week, increasing doubts over the pace of fuel demand recovery in the world's largest energy consumer.
U.S. crude for November delivery rose 62 cents to $70.19 a barrel by 0839 GMT. The contract closed $1.31 lower at $69.57 a barrel on Wednesday.
London Brent crude gained 62 cents to $67.82.
"A weaker dollar is going to continue to help oil and the latest corporate results are supporting a lot of markets today," said CMC Markets analyst James Hughes.
Hughes urged caution over reading too much into positive headline numbers during the corporate earnings season as figures can be enhanced by expenditure reductions rather than increased revenue.
"I'm still a little bit sceptical about these results but it looks like investors are going to look through that and are going to accept cost cutting earnings for now."
Alcoa Inc posted a surprise profit on Wednesday, thanks to cost cutting and higher aluminium prices after three consecutive quarterly losses, sending its stock 6 percent higher.
Australian employment numbers surged past all expectations in September, adding to economic recovery hopes. The jobless rate dropped in what might be a turning point months earlier than anyone had thought, pushing stock markets higher and piling pressure on the U.S. dollar.
A weaker dollar supports oil because it makes commodities priced in the greenback cheaper for those holding alternative currencies.
Still, some analysts doubt whether oil will rise beyond the $75 mark, as the market remains well supplied and the global economic recovery, along with energy demand, remains fragile.
"The road to recovery is unlikely to be as smooth as some expect and will come with a few bumps along the way. The hard data (factory orders, capital goods orders) have disappointed relative to the direction suggested by the new orders' components in the ISM manufacturing surveys," Harry Tchilinguirian, an oil analyst at BNP Paribas, said.
The Energy Information Administration reported gasoline stocks leapt 2.9 million barrels last week, nearly three times the build that analysts had expected.
Distillate stocks — which include diesel and heating oil — rose by 700,000 barrels, more than double the forecast 300,000-barrel build.
Investors will keep their eyes peeled for economic data due later in the United States on Thursday, including weekly jobless claims, wholesale inventories for August and chain store sales for September.
Expectations of prolonged peace and increased crude production in Nigeria took a backward step after its main militant group said it will resume attacks against Africa's biggest oil and gas industry once its three-month old ceasefire expires at the end of next week.
The Nigerian minister of state for petroleum told Reuters on Wednesday oil production has risen to 1.6 million barrels per day due to the decline in violence.
