ECB's monetary policy meeting is expected to deliver a 25 basis points rate cut
Brent crude rose above $110 on Thursday, as the market shrugged off data showing a gain in US crude stockpiles and looked forward to further measures by the European Central Bank (ECB) to support growth.
The ECB's final monetary policy meeting of the year later on Thursday is expected to deliver a 25 basis points rate cut, even as market participants pin their hopes on European policy makers to agree on a plan to tackle the region's debt crisis at a summit on Friday.
Brent crude rose 48 cents to $110.01 a barrel by 0720 GMT, after settling Wednesday $1.28 lower at $109.53 a barrel. US crude was up 28 cents at $100.76 a barrel.
"Fundamentals are better than expected and the US and Chinese economies seem to be stabilising, but trading will be cautious before Friday's Europe meeting," said Tetsu Emori, a fund manager with Astramax Co. in Tokyo.
"The market's direction will be determined after the summit, and a good result will send prices higher."
Oil strengthened even after an unexpected rise in US crude inventories, which climbed by 1.34 million barrels last week, versus a forecast for a 600,000-barrel drawdown, government data showed on Wednesday.
The numbers also contradicted industry data released on Tuesday showing US crude stocks fell by 5 million barrels.
"[The EIA] data at times were internally inconsistent, notably relative to the crude stock build," analysts at BNP Paribas said in a research note.
"We believe the extent of the reported crude stock build is likely to be revised downwards, or reversed, once more complete monthly data is subsequently published."
European shares are expected to rise, after stuttering in the previous session, amid hopes of further support measures from the ECB for strained money markets.
Market participants also weighed the impact of news that top oil exporter Saudi Arabia said it was pumping oil at the highest rate in decades, in a signal it intends to meet customer demand with more output if necessary.
Some analysts were sceptical about the accuracy of the data, and noted that if it was true the move might push prices higher as Saudi Arabia's spare production capacity narrows.
"The Saudis might want to show that they are the ones holding the majority spare capacity. Some might think that more supply will ease prices, but their idle capacity is now smaller and prices could rise if there is some supply disruption," said Emori.
The Organisation of the Petroleum Exporting Countries is due to meet on Dec. 14 in Vienna to discuss output policy for early 2012.