Brent crude rose nearly $3 a barrel on Thursday, closing shy of $103 as a rate cut by the European Central Bank supported riskier assets, although a shaky outlook for global oil demand and ample supply capped gains.
The ECB cut its main interest rate to a record low of 0.50 percent, sparking a broad commodity rally and boosting equities and the dollar, one day after the U.S. Federal Reserve said its own monetary policy would remain unchanged.
A better-than-expected U.S. jobless claims report suggested the employment market was recovering. Data showed claims for jobless benefits fell sharply last week to 324,000, a five-year low.
Brent crude gained $2.90 a barrel to settle at $102.85 after trading between $102.98 and $99.51. It fell more than 2 percent on Wednesday and has lost over 7 percent this year.
U.S. crude closed $2.96 higher at $93.99 a barrel, up 3.25 percent.
"Oil is up because of the stock market and the Europeans lowering their interest rate. The thought is that is going to improve their economy and increase demand," said Mark Waggoner, president of Excel Futures in Bend, Oregon.
After trading up around $1 throughout the morning, prices spiked upward around 11:30 a.m. EDT (1530 GMT) and again just before 2:30 p.m. EDT (1830 GMT). Traders cited refinery troubles and a climate of volatility as possible factors behind the climb.
"The Fed hasn't changed the outlook for stimulus, and we now have (ECB President) Mario Draghi on board for more stimulus. Add in a little refinery outage, and boom, you're on your way," said Phil Flynn, energy analyst with Price Futures Group in Chicago, referring to a catalytic cracker outage at CVR Refining's 70,000-barrels-per-day refinery in Wynnewood, Oklahoma.
Gene McGillian, an analyst with Tradition Energy in Stamford, Connecticut, said the present economic uncertainty contributed to price volatility.
"The trading range is between $85 and $95 (for U.S. crude)," he said.
"Until we get a clear indication of how the global economy is going to look over the next six months to a year, we can expect this whipsaw trading to dominate the action."
Larger issues of supply, demand and global growth prospects raise doubt about oil's trajectory in the medium term.
A survey showed China's factory-sector growth eased in April, suggested the euro zone recession and sluggish U.S. demand may be weighing on China's recovery. Another survey showed India's factories lost momentum last month.
"In the short term, weak demand prospects will keep oil prices in check," said Carsten Fritsch, an analyst at Commerzbank in Frankfurt. "Prices will struggle to make considerable gains in the current quarter."
While the demand picture is shaky, supplies are strong. Oil output from the Organization of the Petroleum Exporting Countries rose in April, according to surveys this week.
On Wednesday, a U.S. government report showed crude stocks in the United States hit a record high of 395.3 million barrels, weighing on oil prices.
Despite bearish developments in oil demand and supply, Wednesday's pledge by the U.S. Federal Reserve to stick to its monetary stimulus plan has provided some support. Investors are waiting for Friday's U.S. nonfarm payrolls report for April. (Additional reporting by Alex Lawler in London; Editing by Marguerita Choy and Dale Hudson)