Crude oil futures rebounded on Thursday, as investors saw some progress in Italy's efforts to solve its debt problems and US data showed a slight improvement in the economy, beefing up appetite for risk. Prices had already risen in early trade as data showed that China, the world's No. 2 oil consumer, imported more crude oil last month.
The euro bounced from a one-month low against the dollar as Italian bond yields stabilised with a better-than-expected debt auction and as it moved closer to a national unity government. Greece named a technocrat to lead an interim crisis government.
In London, ICE Brent crude for December delivery settled at $113.71 a barrel, gaining $1.40, or 1.3 percent, after hitting a high of $114.13. On Wednesday, it fell for the first time in five sessions.
On the New York Mercantile Exchange, US December crude settled at $97.78 a barrel, rising $2.04, or 2.1 percent, the highest for a front-month contract since July 26. US crude had retreated on Wednesday after gaining in five straight sessions. Brent's premium against US crude narrowed to $15.93 at the close, from at $16.57 on Wednesday.
Brent trading volume was up 8.5 percent above its 30-day average as of 3 pm EST (2000 GMT). US crude dealings lagged and were 11.7 percent below its 30-day average. New US claims for unemployment benefits fell last week to their lowest level since early April, and the trade deficit unexpectedly shrank in September - pointing to a slight improvement in the economy of the United States, the world's top oil consumer.
Also supportive for US crude, front-month heating oil futures closed at their highest level since May, buoyed by Wednesday's government data showing a 6 million barrel drop in distillate stocks last week. Distillates include heating oil and diesel fuel.
"Yesterday's data showing a big draw in distillates has placed forward demand cover at their tightest in years," said Phil Flynn, analyst at PFGBest Research in Chicago. Chinese data showed resilient domestic demand, with crude oil imports rising in October by 1.7 percent from September. China's trade surplus was smaller than expected in October, as exports grew 15.9 percent from a year earlier while imports jumped 28.7 percent.
"There is enough demand for oil in the world from places like China and the developing world that the eurozone is not of overriding importance," said Jefferies Bache oil broker Christopher Bellew, adding that he thought the Brent market was in a new trading range between $112-$116 a barrel.
The grim global economic prospects, combined with high oil prices, prompted the International Energy Agency, energy adviser to 28 industrialised nations, to cut its world oil demand forecast this year and next. The market continued to weigh the risk of a supply disruption from Iran, as Western leaders called for expanded sanctions against the Opec member over a report from the UN International Atomic Energy Agency that Tehran has worked to design atom bombs. Worries over sanctions on Iran, or even an attack on Tehran's nuclear operations, has caused the backwardation or premium for prompt Brent crude over forward prices to narrow. US bond markets will be closed on Friday in observance of the Veterans Day holiday. The US stock and commodities markets will remain open.