Brent crude futures held above US$116 per barrel on Wednesday after positive economic data from US and Europe
Brent crude futures held above US$116 per barrel on Wednesday after positive economic data from the United States and Europe bolstered the view that the global economy is on the mend.
The vast US services sector extended a three-year run of growth, boosting riskier assets, while data showing signs of recovery in Europe's business activity also helped calm nerves jarred by fears a potential political turmoil would derail the region's efforts to resolve its debt crisis.
"The markets are now more optimistic about the world economy, so oil prices are heading up, but gradually," said Ken Hasegawa, a commodity sales manager at Newedge in Tokyo.
Brent rose 11 cents to US$116.63 per barrel at 0402 GMT, extending its gains from the previous session when it hit a more than four-month high.
US crude shed 3 cents to trade at US$96.61.
Brent may test US$120 per barrel this month, while US oil may remain under a little pressure, added Hasegawa.
US crude has dropped more than a percent so far this week, versus a mostly steady Brent, as concerns about excess supply at Cushing, Oklahoma - delivery point for the US contract - weigh on the benchmark.
Brent on the other hand has been supported by an expected shortfall in March supply of the four North Sea crude oil grades that underpin the futures contract.
The crisis-ridden euro zone economy appeared to have turned a corner based on data this week.
Markit's Eurozone Composite PMI, based on business activity across thousands of companies, and a good gauge of economic growth, rose in January to a ten-month high of 48.6 from 47.2 in December.
While still below the 50 mark that divides growth and contraction, where it has been since February last year, it has risen for the third straight month.
But there were some troubling signs as well. The data from Germany was strong while France lagged even troubled nations such as Spain and Italy, which means the region as a whole may not be progressing as indicated by the data.
"Concerns over Europe appear to have eased, although problems in the region are still a long way from being resolved and fiscal austerity measures will continue to contribute to soft energy demand throughout 2013," National Australia Bank analysts wrote in a report.
Investors will now be looking out for the European Central Bank's meeting on Thursday and China's trade numbers due on Friday for more clues on the health of the global economy and what it may mean for commodities demand.
US crude inventory data will also be on the radar. Analysts estimated that US commercial crude oil stockpiles rose last week on higher imports and lower refining activity.
Data from the American Petroleum Institute showed that crude stockpiles rose by 3.6m barrels last week, more than the 2.8m barrel rise that analysts had forecast.
Weekly inventory report from the US Department of Energy's Energy Information Administration is scheduled for release later in the day.
The oil markets were monitoring developments in the Middle East, where sanctions-hit Iran has taken delivery of several new tankers from Chinese shipyards, giving it more flexibility to maintain exports.
Iran and world powers announced new talks on Tehran's nuclear programme on February 26, but hopes of progress were tempered when an Iranian official said the West's goal in talking was to undermine the Islamic republic.