Brent crude oil rose to around $109 per barrel on Thursday, consolidating after seven days of falls as better-than-expected data suggested the world economy was recovering, but analysts said the overall outlook for oil prices was bearish.
The number of Americans filing new claims for unemployment benefits fell last week, in a sign that the labor market of the world's top oil consumer is healing.
Initial claims for state unemployment benefits dropped 23,000 to a seasonally adjusted 369,000, the U.S. Labor Department said on Thursday.
Also supportive for oil were official figures from Britain showing the UK economy left recession behind in the third quarter, as the Olympics helped it post its strongest quarterly GDP growth in five years.
Brent crude was up $1.20 to $109.05 a barrel by 1330 GMT, snapping its longest losing streak since July 2010. U.S. oil gained 70 cents to $86.43, after settling down for the fifth straight session.
"We're seeing a small short-covering bounce," said Tony Machacek, a broker at Jefferies Bache in London. "Longer term, maybe, we're due to be heading lower."
Analysts said a resumption of production in the North Sea and a cooling of geopolitical risks could push oil prices down.
"We expect Brent prices to ease towards $100 at year-end. The 2012 average remains $110," ABN Amro Commodity Research team said in a note to clients.
"With early elections in Israel (Jan. 22), the immediate threat of an escalation between Israel and Iran is pushed back towards the spring/early summer in 2013. (Therefore) a lower risk premium could be seen in the near term," it said.
The operator of the Buzzard oilfield in the North Sea, the UK's largest, confirmed on Thursday that output was resuming more slowly than expected after maintenance work.
Buzzard operator Nexen said the company was "in the process of restarting" the field and expected production to ramp up in the next week to 10 days. Buzzard was originally expected to be back up by the middle of October.
Buzzard is the largest of the fields that contribute to the Forties crude blend, the most important of the North Sea crudes underpinning the Brent crude benchmark. The restart of the field, shut since early September, has been delayed repeatedly.
Prices were under pressure from data showing U.S. crude stocks rose sharply last week as imports increased and refinery utilisation fell. Stocks climbed by 5.9 million barrels, the Energy Information Administration reported. Analysts polled by Reuters had forecast an increase of 1.9 million barrels.
U.S. gasoline inventories rose by 1.44 million barrels, compared with analyst expectations for a 700,000-barrel climb. Distillate stocks, which include diesel and heating oil, fell by 646,000 barrels in the week, compared with analyst forecasts for a drop of 900,000 barrels.
"This report was bearish for crude, gasoline, heating oil and jet kero, and bullish for diesel. Despite positive macroeconomics signs in US, core products' demand was weak," said Societe Generale.
Meanwhile a worsening economic outlook for the euro zone and signs the currency bloc's debt crisis may be taking its toll on the German economy kept concerns about oil demand fresh.
Germany's private sector shrank for a sixth month running in October as factory order books thinned and demand for exports weakened, surveys showed, suggesting Europe's largest economy entered a recession in the second half of 2012. (Additional reporting by Manash Goswami in Singapore; editing by Christopher Johnson)