Brent crude rose above $101 a barrel on Wednesday, snapping a three-day losing streak, after the Federal Reserve promised to launch more measures to help the fragile U.S. economy and European finance ministers agreed to safeguard their banks.
Fed Chairman Ben Bernanke said the U.S. central bank was prepared to take further steps to help an economy that was "close to faltering," in his bleakest assessment yet of the fragile U.S. recovery. Oil prices also got a boost from the unexpected fall in crude stockpiles.
Brent crude rose $1.90 to $101.69 a barrel by 0500 GMT, after surging to as much as $102.10. The contract fell on Tuesday into the bear market territory, defined as a 20% drop from recent highs, after closing at $99.79 a barrel — its lowest settlement since February.
U.S. crude was up $2.35 at $78.02 a barrel, after touching an intraday high of $78.46.
"The Dow Jones Industrial average rose sharply ahead of the stock market close (yesterday), and commodities followed that lead," said Masaki Suematsu, at brokerage Newedge in Tokyo.
Suematsu said an agreement by European finance ministers to safeguard their banks also aided sentiment of investors that have been recently selling out of risky assets on concern a deepening debt crisis in the euro zone could infect the global economy.
That agreement came after French-Belgian municipal lender Dexia SA became the first European bank to need to be bailed out because of the euro zone's sovereign debt crisis.
Japan will also be lending its support, as it plans to buy more bonds issued by Europe's bailout fund to help contain the euro-zone debt crisis, the Nikkei business daily reported.
Bank of Japan Governor Masaaki Shirakawa on Wednesday offered a bleak assessment on the country's economic outlook but said the central bank was already taking bold steps to support growth.
Technically, Brent is expected to revisit the previous trading session's low of $99.11 per barrel, while U.S. crude is likely to retest the $75.68-$75.71 levels, said Reuters market analyst Wang Tao.
INVENTORY DRAW
U.S. commercial crude stocks fell unexpectedly last week as imports dropped, and oil product inventories also declined, oil trade group American Petroleum Institute said.
Crude stocks in the United States fell 3.1 mln barrels in the week to September 30, API said. Analysts polled by Reuters had projected, on average, a 1.9 mln barrel rise.
The U.S. Energy Information Administration will release its weekly data later on Wednesday.
"The market will be looking to official inventory data for some direction, but macroeconomic worries regarding Europe will continue to drive sentiment this week," ANZ bank said in a research note.
Still, Brent prices remain under pressure as OPEC member Libya is restoring output disrupted by the months-long civil war. Libya will start pumping crude at two major oilfields in about two weeks, doubling production to 700,000 barrels a day by year-end, the head of its National Oil Corp. told Reuters.
