Fears about supply disruption offset pressure from high inventory build and persisting EU woes
Brent stayed firm at above $113 on Thursday as worries about supply disruption from Nigeria and Iran offset pressure from a high inventory build and persisting eurozone debt woes.
Oil investors fretted about mounting tensions between the West and Iran after an Iranian nuclear scientist was blown up in his car by a motorbike hitman on Wednesday, prompting Tehran to blame Israeli and US agents.
Brent crude rose 83 cents to $113.07 a barrel by 0623 GMT. US oil was up 49 cents a barrel to $101.36 as of 0022 GMT.
"Clearly, there are reasons for the market to be jittery," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.
"The more jittery the markets are, the higher the oil prices, and the more likely that there will be some resistance in the EU about the sanctions," he said.
"I think the market is discounting the ability or the willingness of Iran to do something. So we haven't seen prices rally that much."
Washington imposed additional sanctions on Iran last month and the European Union will have a meeting on Jan. 23 to decide on whether to embargo Iran's oil.
As Washington steps up efforts to sanction Tehran over its disputed nuclear programme, Japan and South Korea are looking to reduce oil imports from Iran and seek alternative sources instead.
A nationwide protest in Nigeria against the scrapping of a fuel subsidy has further compounded fears of supply disruptions beyond Iran.
Nigeria's biggest oil union said it was ready to halt oil output if the government did not reinstate the subsidy.
Output has so far been unaffected but the threats were enough to unnerve the market as Africa's biggest oil exporter ships around 2 million barrels of crude oil per day and is a key supplier to the United States and Europe.
Investors were clearly focused on supply issues and looked past sharply higher US crude stocks.
Inventories surged 4.96 million barrels to 334.65 million barrels in the week to Jan. 6, data from the US Energy Information Administration (EIA) showed.
This was well above estimates for an 800,000-barrel build in a Reuters poll of analysts.
Japan's commercial crude oil stocks were also up, rising almost 3 million barrels, or 3.1 percent, from the week before to 15.9 million kilolitres (99.7 million barrels), the Petroleum Association of Japan (PAJ) said.
The lingering European sovereign debt issue was overshadowed by supply concerns, but market volatility will remain as investors struggle to balance the effects of weaker demand and geopolitical risks.
"The economic conditions are likely to continue to deteriorate. The fundamentals support for oil should be easing, but that may not result in weaker prices in the geopolitical environment," said Friesen.