Brent crude rose above US$107 a barrel in Asia on Thursday as a slump of almost 4 percent in the previous session
Brent crude rose above US$107 a barrel in Asia on Thursday as a slump of almost 4 percent in the previous session, its biggest fall in about a year, lured in some buyers, although worries on the US fiscal cliff and Europe's woes kept a lid on gains.
Oil led a slump in commodities on Wednesday as concerns shifted to a shaky global economy and its impact on demand, after the uncertainty about the US presidential race faded with Barack Obama's re-election.
"What we're seeing is some shortcovering, but I don't expect oil to rebound completely," said Ken Hasegawa, a commodity sales manager at Newedge Japan in Tokyo.
"With all these uncertainties in Europe and the United States, I don't think oil demand will increase."
Front-month Brent futures traded 64 cents higher at US$107.46 per barrel by 0527 GMT. Brent's near 4 percent slump on Wednesday was its steepest since December 2011.
US crude rose 57 cents to US$85.01 a barrel, after losing nearly 5 percent in the previous session, also its biggest slump since December 2011.
Investors were also monitoring the impact of a second winter storm that hit the US Northeast on the heels of devastation by Hurricane Sandy as well as data showing higher US inventories of crude and products last week.
After weeks of rangebound trading ahead of the US presidential elections, the market began to focus on economic uncertainties after the election.
Topping the list are negotiations on the "fiscal cliff," a US$600bn package of spending cuts and tax increases that may trim the deficit but push the fragile US economy into deep recession.
Weakness in the US economy at a time when China is struggling to push up its growth rate and Europe is grappling with its debt crisis may derail the global economic recovery even further.
Still, some analysts said the United States could ease policy through outright asset purchases by the Federal Reserve.
Europe's crisis swung back into focus after European Central Bank Chairman Mario Draghi said the euro zone economy will remain weak in the near term, even as he hinted at unlimited intervention in the region's sovereign markets.
"We expect the focus to quickly shift to three themes for the last 50 days of the year: euro area growth, Greece, and the fiscal cliff," Credit Suisse analysts said in a report.
Recent data "remain consistent with continued pressure on the ECB to ease policy further and with lower front-end yields in the core of Europe."
The ECB will review rates on Thursday and is expected to leave interest rates on hold, preferring instead to buy bonds of crisis-ridden governments that seek aid.
Investors will also be monitoring the one-in-a-decade leadership change in China, the world's number two energy consumer, as President Hu Jintao hands over charge to his successor Xi Jinping, though there are no real concerns about policy changes.
But supply concerns, with increasing violence in the Middle East, are expected to keep prices supported.
Syrian rebels fired mortars at President Bashar al-Assad's palace in Damascus on Wednesday but missed, in an attack underlining the growing boldness of forces fighting to end his family's 42 years in power.
In Yemen, a gunman shot dead a Yemeni security officer near the interior ministry in the centre of the capital Sanaa on Wednesday, a police source said, blaming al Qaeda.
The US and Yemen's neighbour, Saudi Arabia, are keen to stop al Qaeda and other Islamist militants strengthening their hold on a country that is close to major shipping lanes.
Reining in gains, data showed that US crude and product stocks rose last week in spite of inventory drops on the East Coast, where Hurricane Sandy interrupted imports, refining activity and fuel supply chains.
Domestic crude stocks rose 1.77m barrels in the week to November 2, government figures showed, in line with analyst forecasts in a Reuters poll for a rise of 1.8m barrels.