US gasoline stocks fell 5.4 million barrels, more than forecast, the American Petroleum Institute (API) said on Tuesday. Better-than-expected US industrial production figures also helped bolster sentiment.
Brent crude for October rose $1.18 to $110.31 by 1015 GMT. It fell to $98.74 on Aug. 9, the lowest since February, on concern about economic slowdown. US crude was up 95 cents at $87.60.
"Oil has steadily, if not slowly, recovered from its risk aversion mode plunge that also took down equity markets," said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas.
"Increasingly, oil will look again at its own drivers. As such this morning, the market is likely reassured that we are not accumulating gasoline inventories in the US, given the steep draws reported yesterday evening by the API.
"We will be looking to see if that number is confirmed in the EIA release this afternoon."
The US government's Energy Information Administration releases its supply report at 1430 GMT. Crude inventories will also be a focus, after the API said they rose by 1.75 million barrels.
A meeting between the French and German leaders on Tuesday did not calm investor concern about Europe's sovereign debt problems. Some analysts said the worries could again prove a drag on oil prices.
European stocks slipped following on from losses in Asia, while the euro fell against the dollar. Gold, attractive to some investors as a safe haven, held steady near a record high.
BULLISH NEAR TERM
Barclays Capital technical analysts said the near-term Brent outlook was bullish with the contract trading above the 200-day moving average, while US oil was set to push towards $90 where it expected selling interest to cap the rally.
Concerns about the European debt crisis have weighed on oil markets in recent weeks, adding to worries about weak US economic data that could hit fuel demand.
The euro zone economy slowed sharply in the second quarter, hobbled by sluggish growth in Germany and stagnation in France, raising fears of a longer-term dip.
Oil has gained support this year from the conflict in Libya which has shut down fields that once pumped 1.6 million barrels per day (bpd). The loss has bolstered Brent in particular as most of Libya's oil was priced against it.
Much of Libya's output could be restored within months if peace can be established, analysts say. Rebels fighting to topple Muammar Gaddafi denied reports of secret talks with the Libyan leader on Tuesday.
Copyright Reuters, 2011