Oil rose above $74 on Thursday, rebounding from six-week lows hit the previous day, after a speech by U.S. President Barack Obama eased market worries over plans to limit bank risk-taking by not revealing concrete moves.
The market also derived support from the Federal Reserve's decision on Wednesday to leave interest rates near zero to nurture economic recovery in view of high jobless rates in the United States, the world's top oil consumer.
U.S. crude oil futures rose 54 cents to $74.20 a barrel by 1300 GMT, after briefly touching $72.65 on Wednesday, the lowest intra-day price level since Dec. 14.
Brent crude futures were 54 cents higher at $72.78.
Obama's announcement last week that he planned tough new measures that could break up big banks had prompted selling of financial shares as investors feared it would slash profits and spell a more intrusive government approach to business.
But on Wednesday night, Obama pushed jobs creation to the top of his agenda in his State of the Union address and said he would work to dig the country out a "massive fiscal hole".
"The market is still focusing on the macro economic side," said Rob Montefusco, trader with Sucden Financial. "Obama may start reining banks but they are focusing on creating jobs. If they rein too much, people may lose their jobs. This is not good."
Asian and European shares rose, led by banks such as UBS, Barclays and Societe Generale.
The dollar fell against the euro due to increased risk appetite, lending further support to oil. A weaker dollar makes commodities priced in the U.S. unit cheaper for holders of other currencies.
DEMAND WORRY
Montefusco said oil's gain may also be a reaction to the sharp fall in prices from a 15-month peak near $84 on Jan. 11, and that weak demand remained a worry.
Weekly oil data from the U.S. government showed that middle distillate inventories, including heating oil, rose unexpectedly last week.
Distillate inventories typically fall around this time of the year in the northern hemisphere winter and the increase despite historically low refinery run rates.
U.S. oil demand shrank 2 percent in the four weeks to Jan. 22 from a year earlier.
"U.S. oil demand is still contracting against a level last year when it was at the worst of the recession," Harry Tchilinguirian, senior oil analyst with BNP Paribas, said.
