Brent crude held above $102 a barrel after surging in the previous session as pessimism about weaker demand was outweighed by a surprise drawdown of U.S. inventories and concerns that Libya's largest oilfield could be damaged.
Hopes of an early return of Libyan supplies to global markets after months of war were dashed after Italian oil major Eni said it feared its largest oilfield in the North African nation might be in ruins.
That statement, coupled with a fall in U.S. crude stocks to their lowest since January and hopes that Europe would prop up its banking sector, supported oil prices.
"We went from about $76.00 to around $79.70 for WTI (this week) and prices holding on to those highs shows the market is pretty much doing alright," said Jonathan Barratt, managing director at Commodity Broking Services in Sydney.
"I won't worry about the fact that prices are down by a fraction today."
Brent November crude futures fell 37 cents to $102.36 by 0537 GMT, pulling back slightly from a gain of nearly 3% the previous day. U.S. crude , which jumped more than 5% on Wednesday, was down 16 cents to $79.52 a barrel.
News of Europe stepping in to assist its financial sector helped base metals, the euro and global stock markets recover. U.S. economic data pointing to an improved outlook for industrial metal demand also provided support.
Brent faces resistance at $103.24 per barrel, a break above which will trigger a further rebound towards $105.79, said Reuters market analyst Wang Tao.
Crude stocks dropped 4.68 mln barrels to 336.28 mln barrels in the week to September 30, the U.S. Energy Information Administration said, beating analysts' expectations for a 1.9 mln barrel build.
Gasoline stocks fell an unexpected 1.14 mln barrels, while distillates slipped 744,00 barrels, the EIA said.
"What the market is looking at is inventory," Barratt said.
OIL OUTPUT
Italian oil major Eni's largest oilfield in Libya, known as Elephant, may be in ruins, its operations manager, Mustafa Abougfeefa, said in an interview. The oil field pumped 130,000 barrel per day before the war.
"We cannot promise the field will start producing before the end of the year. Gaddafi's militia destroyed everything," Abougfeefa said.
Global oil prices below $90 a barrel would be difficult to accept, Iraq's Deputy Prime Minister for energy Hussain al-Shahristani told Reuters on Wednesday, in a sign a slide in prices is starting to worry some members of oil cartel OPEC.
Shahristani added that he saw no need for OPEC to review its crude output at its next meeting in December and no reason now to trim production.
"We will start to see OPEC reverse their production increases when Libyan oil slowly start to come on track," said Barratt of Commodity Broking Services.
Still, volatility in oil prices will remain as investors take positions based on the economic outlook for the western hemisphere, analysts said.
U.S. initial jobless claims later on Thursday will be the next clue to how the world's largest economy is doing. The market will also focus on non-farm payrolls data due on Friday.
