U.S. crude rose on Thursday as fund activity helped the market to recover from a sell-off the previous session, but oversupply curbed gains.
NYMEX crude for January delivery rose 69 cents to $77.29 a barrel by 1333 GMT, after settling down $1.77 at $76.60 on Wednesday.
Brent crude rose 92 cents to $78.80 per barrel after touching a session high of $78.91.
Wednesday's falls, which stemmed a two-day rise, followed U.S. government data showing crude stocks rose 2.1 million barrels last week, topping the forecast for a 400,000 barrel rise in a Reuters poll.
The mass of available crude had a particularly marked impact on contracts for delivery in the near term and fund flows were moving from the front-month January contract into February crude, analysts said.
A European Central Bank announcement that it would maintain its main interest rates at 1 percent, widely expected and generally priced in, held no sway over oil prices, but set the stage for an eventual phase-out of its financial crisis support.
The focus will now be on what ECP President Jean-Claude Trichet says at his 1330 GMT news conference.
"The end result over the next six months is you have low interest rates with unleveraged cash in bank accounts seeking somewhere to go in search of yield, and this favours risk appetite and supports equities," said senior BNP Paribas commodities analyst Harry Tchilinguirian.
This can also support oil, but its weak fundamentals have modified the potentially bullish impact.
"Oil will keep doing what it has been doing in relation to equities since March. It's not that oil prices are disconnected from fundamentals, it's that front month prices are reacting to equity markets," Tchilinguirian said.
European shares rose for a third consecutive session on Thursday. The FTSEurofirst 300 was up 0.4 percent at 1,020.20 points and 58 percent from the life-time low in March after slumping 45 percent in 2008 because of the global economic downturn.
OPEC OUTPUT
Oil hit a high of $82 a barrel in October, but failed to hold above that level as the combination of excess supply, sluggish demand and nervousness about a fragile world economy have knocked the market lower.
The Organization of the Petroleum Exporting Countries meets to reconsider its output policy on Dec. 22 in Angola.
Ahead of that, ministers of the core Arab members of OPEC meet at the weekend in Cairo, where they are expected to discuss supply and demand but without taking formal decisions on the group's production.
Kuwait's oil minister in comments to reporters on Thursday said he was concerned about the high levels of inventory, although he did not expect the group to change output targets at its December meeting.
Adding to OPEC's challenges, the biggest non-OPEC oil exporter Russia set a fourth consecutive monthly output record in November.
It is currently the world's largest producer, although Saudi Arabia is the world's biggest exporter and has shut in spare capacity.
