LONDON: Oil prices were little changed on Thursday, holding on to gains in the previous session on the back of weaker US stockpiles, as the International Energy Agency called for oil producers to protect the economy.
Oil had undergone a severe correction in the past two weeks, and prices are likely to remain volatile on concerns about economic recovery in the United States and unresolved sovereign debt issues in the euro zone.
By 1216 GMT, ICE Brent for July delivery was up 16 cents at $112.46 a barrel after rising more than $2 the previous day. Front-month Brent prices are down around 10 percent from the start of May.
US crude for June delivery were 10 cents higher at $100.20 a barrel.
The Paris-based IEA issued a warning urging producers to take action to protect the economy and welcomed commitments to raise output in a statement ahead of the OPEC meeting on June 8.
Analysts said it was an unusual move for the energy advising watchdog, which typically does not comment on oil producers’ policies.
"The governing board urges action from producers that will help avoid the negative global economic consequences, which a further sharp market tightening could cause, and welcomes commitments to increase supply," the IEA said in a statement, warning prices remained at high levels despite a near 10 percent correction since the start of the month.
"It is quite rare that the IEA goes out directly to give suggestions to OPEC," said Christin Tuxen, Danske Markets. "It suggests the IEA is worried that we haven’t seen OPEC increasing supply."
Oil prices continued to get support from US data on Wednesday showing an unexpected 1.6 million barrel drop in crude inventories at the delivery point for NYMEX contracts of Cushing, Oklahoma.
"We have a steady dollar and a strong equities market today, while yesterday’s inventory report was also quite bullish," Commerzbank analyst Carsten Fritsch said. "However, things are more sentiment-driven than fundamentally driven at the moment."
The support could prove short-lived, another analyst said, in the absence of any major catalysts, with all eyes focused on US weekly jobless figures due later.
"We think the run higher could continue for a little while longer, building on the head of steam that Wednesday’s rally generated," MF Global analyst Edward Meir said.
"However in the absence of any upside catalyst that can be considered a pivotal event, we suspect the move will ultimately be regarded as nothing more than a technical ‘relief rally’ in what is still a down market."
"I still see (the market) in fairly narrow trading, taking a breather," VTB Capital’s Andrey Kryuchenkov said.
Investors will scour data from the United States, such as the weekly unemployment claims due at 1230 GMT, for indications of economic health. Economists in a Reuters survey forecast a total of 420,000 new filings compared with 434,000 in the prior week.
"It’s been a quiet morning, I think we are waiting to see the jobless figures in the States, I don’t expect any sharp movement (in prices) prior to that," Thomas said. "It seems the catalyst will probably be the US jobless figures.
Other data includes US existing home sales for April due at 1400 GMT.
Economic recovery
Oil prices are expected to remain volatile as weak economic data from the United States and the debt crisis in the euro zone fuel concerns about demand as oil prices remain above $110 a barrel.
The euro zone troubles remained in focus as the IMF warned Greece on Wednesday that it would fail to shore up the country’s finances unless it redoubled reform efforts, with euro zone officials dismissing suggestions that a mild debt restructuring might help.
US factory output slipped for the first time in 10 months in April as a shortage of parts from Japan crimped activity and home building slumped, showing the economy got off to a weak start in the second quarter.
"Economic data in the United States is starting to soften a little bit, so it’s not going to have a good impact on oil prices," Le Brun said. –Additional reporting by Florence Tan in Singapore
