Brent crude oil prices held near $102 a barrel on Thursday, underpinned by a weaker dollar, while U.S. crude's discount to Brent fell below $10 for the first time since June 2012.
The spread between the front-month Brent crude oil futures contract and the U.S. crude oil futures contract (WTI) narrowed to as little as $9.94 a barrel, in from over $20 a barrel in mid-February.
David Hufton, a strategist at broker PVM, said that the puncturing of the global economic growth story had had a much larger impact on Brent than U.S. crude, knocking Brent down by more than 5 percent since the start of April. Plentiful supplies of North Sea crude have also pressured Brent.
"WTI has been supported by a more optimistic U.S. growth story and the partial unravelling of domestic transportation blockages," he added.
U.S. crude had been trading at a wide discount to Brent because of large inventory builds at key pricing point Cushing, Oklahoma. But pipelines are now taking more crude to the U.S. Gulf Coast, alleviating the supply pressure at Cushing.
"The reversed Longhorn pipeline in West Texas seems to have been successful in this case," said David Wech, an analyst at JBC Energy in Vienna.
By 1118 GMT, Brent crude was up 2 cents at $101.75 a barrel, just holding on to Wednesday's gains, but analysts were sceptical as to how long this would last. U.S. crude was up 14 cents at $91.57 a barrel.
"We still expect Brent to remain range-bound with little chance for a sustained rebound here ahead of U.S. Q1 2013 GDP estimates tomorrow," said Andrey Kryuchenkov, an analyst at VTB Capital. "Yesterday's price rebound is set to stall."
The weaker U.S. dollar, which was off 0.66 percent against a basket of currencies, was helping underpin oil prices. A weaker dollar makes commodities priced in dollars more affordable for buyers using other currencies.
But analysts said doubts were creeping back into the market after a rally late on Wednesday that followed the weekly U.S. crude oil and products inventory data and better-than-expected South Korean growth data.
South Korea's economy expanded in the first quarter at its fastest pace in two years, but customs figures, which measure the value of exports, painted a less rosy picture.
Bjarne Schieldrop, chief commodity analyst at SEB, said South Korea was seen as "the canary in the coal mine" because of its industrial order book, as it produces so many components. "But it looks as if that first-quarter growth was more to do with front-loaded government spending," he said.
Analysts also cautioned against a bullish interpretation of Wednesday's weekly U.S. gasoline stockpile data, which saw inventories down 3.9 million barrels week-on-week.
"The drop in gasoline stocks was driven by lower refinery production, not just an increase in demand," said Carsten Fritsch, an oil analyst at Commerzbank in Frankfurt. "If you look at the seasonal pattern, it isn't unusual for gasoline stocks to fall at this time of year."
Analysts and traders said the technical picture remained bearish, pointing to weak global demand growth and abundant supplies from the North Sea, the Middle East and North Africa.
At least nine May cargoes have moved up the North Sea Forties crude programme after stronger-than-expected output from Britain's Buzzard oilfield, the biggest contributor to the Forties stream.
In addition, production from Iraq, Libya and the United States continues to rise, raising questions as to whether Saudi Arabia, Kuwait and the United Arab Emirates will have to cut their output.
Meanwhile, on the demand side, although UK gross domestic product showed a 0.3 percent rise in the first quarter, this was partly linked to the bounce back in North Sea oil and gas output. (Additional reporting by Jessica Jaganathan in Singapore; editing by Jane Baird)