Oil extended gains well above $67 a barrel today, after a 5.7 per cent jump in the previous session on US data and earnings which renewed hopes of an economic recovery and drove up equity and commodities markets.
But the latest jump merely erased Wednesday's hefty losses on rising US crude inventories and falling refinery utilisation, with oil heading for its first monthly percentage fall since January, of around 4 per cent.
US light crude for September delivery rose 44 cents to $67.38 a barrel by 0432 GMT, having settled up 5.67 per cent on yesterday, its biggest one-day gain since April 9th.
London Brent crude gained 34 cents to $70.45.
"Short-term fundamentals are weak but prices are moving up on expectations of an economic recovery. The market is driven by the medium- and longer-term outlook," said Tony Nunan, risk manager at Tokyo-based Mitsubishi Corp.
Markets rose on Thursday on government data showing the number of US workers staying on jobless rolls fell to the lowest in three months last week, while the four-week moving average for new claims dropped by 8,250 to 559,000 - the lowest level since late January.
Support also came from data showing euro zone economic sentiment increased in July to its highest level in eight months, helping to lift European equities to their highest close in nearly nine months.
Asian stock markets extended gains today and were poised to score double-digit gains in July, with Japan's Nikkei average hitting a 10-month high while stocks outside of Japan rose to an 11-month high.
Yesterday's jump in oil prices came on the heels of Wednesday's 5.8 per cent loss stemming from a 5.1 million barrels build in US crude inventories and a 1.2 percentage point fall in refinery utilisation.
"We continue to anticipate an unusually tough trading environment in which price follow-through in either direction is unlikely to be sustained by more than 10 per cent or much more than 1 or 2 weeks," said Jim Ritterbusch, president of US energy adviser Ritterbusch and Associates.
Historical volatility rose to its highest level since May this week but implied volatility is more subdued at around 45 per cent, well off early-July peaks. This suggests the options market is feeling more at ease with oil's recent $60-$70 range, even though the swings within it are more pronounced.
The market will be keeping its eyes trained on advance US second-quarter GDP figures, to be released at 1230 GMT, for further signs of an economic recovery.
US president Barack Obama braced the country for more bad economic news yesterday, saying the figures would show the economy contracted and job losses were still a "huge" problem.