SINGAPORE: Brent futures inched higher on Thursday, holding above $108 a barrel, as investors focused on risks from the unfolding crisis in Ukraine and as OPEC raised its 2014 global oil demand growth forecast for a second straight month.
The US oil benchmark plunged more than 2 percent overnight in its biggest drop in two months after Washington announced a surprise plan for a test release of strategic oil reserves, while weekly data showed a big rise in crude stockpiles. Markets are now awaiting economic data from China to gauge the health of the world's second-biggest economy.
Brent crude rose 24 cents to $108.26 by 0203 GMT, after ending 53 cents down to its lowest in a week. US crude gained 11 cents to $98.10, after settling $2.04 weaker at $97.99, below the 50-day moving average of $98.32.
"We are seeing some snap back reaction because the market is seeing the strategic sale as a one-off at this point, barring any emergencies," said Ben Le Brun, a market analyst at OptionsXpress in Sydney.
"The long-term story for China is intact because they have tools at their disposal to steer the economy in case growth is lower than their expectation."
The sharp fall in the US benchmark kept the price between the two contracts wider than $10 a barrel.
Oil, particularly Brent, is drawing support from the unfolding crisis in Ukraine.
The European Union agreed on a framework on Wednesday for its first sanctions on Russia since the Cold War, a stronger response to the Ukraine crisis than many expected and a mark of solidarity with Washington in the drive to make Moscow pay for seizing Crimea.
Also underpinning oil is expectation US fourth-quarter growth is likely to be revised higher after services industry data suggested a much stronger pace of consumer spending than the government had previously assumed.
"I am quite optimistic about the global economic recovery, led by the United States," said Le Brun. "That will support oil in the longer term given that the United States is the biggest consumer."
OUTLOOK
World oil demand will increase more than expected in 2014, OPEC said, raising its prediction for a second straight month as economic growth picks up in Europe and the United States.
In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) said global demand will rise by 1.14 million barrels per day (bpd) this year, up 50,000 bpd from its previous forecast.
Yet, further gains were capped by data from the US Energy Information Administration (EIA) that showed stockpiles of crude rose 6.2 million barrels last week, in the biggest weekly increase since the week ending Jan. 24, and much larger than the 2.2-million-barrel build analysts expected.
Inventories partly surged with refinery utilization rates dropping 1.4 percentage points to 86 percent of capacity as units shut for spring maintenance.
The United States announced a first test sale of crude from its emergency oil stockpile since 1990.
It is offering a modest 5 million barrels in what some observers saw as a subtle message to Russia from the Obama administration.
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