An oil rig of the Great Wall Drilling Company, a subsidiary of China National Petroleum Corp (CNPC), is seen near Varadero, around 140 kilometres (86 miles) east of Havana, September 4, 2011. China has signed an agreement to play a major role in increasing Cuban oil production both onshore and offshore, although details were not disclosed. State-owned CNPC is said to be considering leasing exploration blocks in Cuban waters. China also committed to negotiations of contracts for a $6 billion expansion of Cuba's Cienfuegos refinery and a liquefied natural gas project. Picture taken September 4, 2011. REUTERS/Desmond Boylan (CUBA - Tags: ENERGY BUSINESS POLITICS)

An oil rig of the Great Wall Drilling Company, a subsidiary of China National Petroleum Corp (CNPC), is seen near Varadero, around 140 kilometres (86 miles) east of Havana, September 4, 2011. China has signed an agreement to play a major role in ... increasing Cuban oil production both onshore and offshore, although details were not disclosed. State-owned CNPC is said to be considering leasing exploration blocks in Cuban waters. China also committed to negotiations of contracts for a $6 billion expansion of Cuba's Cienfuegos refinery and a liquefied natural gas project. Picture taken September 4, 2011. REUTERS/Desmond Boylan (CUBA - Tags: ENERGY BUSINESS POLITICS) (Reuters)

Crude Oil Prices Rise, Outlook Still Fragile

Features Reuters

Oil was up about 6 percent on Thursday as rising violence in producing country Libya and an expected boost in oil demand from a central bank easing in China helped crude rebound from one of its sharpest daily routs ever in the previous session.

Continue Reading Below

Traders and analysts said they expect higher-than-usual volatility in coming days as the market tries to find a bottom to a seven-month selloff that took prices to near six-year lows.

But many were pessimistic about the market making a sustained rally, with record-high U.S. crude inventories rekindling renewed worries about a supply glut.

"It is just a changing market sentiment as more and more players are starting to believe production cuts are coming in the U.S. and that will be enough to erase the surplus," Dominick Chirichella, senior partner at the Energy Management Institute, New York, said on the Reuters Global Oil Forum.

"I think there will be a lot of disappointment going forward for that view."

Benchmark Brent crude futures were up $3, or 5.5 percent, at $57.16 a barrel by 1:02 p.m. EST (1802 GMT).

Continue Reading Below

U.S. crude futures, also known as West Texas Intermediate (WTI), were up $3.16, or 6.5 percent, at $51.61.

Brent fell nearly 7 percent and WTI 9 percent on Wednesday after the U.S. government reported a 6.3 million-barrel build in U.S. crude stocks last week to above 413 million, their highest since 1982. The report cut short a four-day rally had sent crude prices nearly 20 percent higher.

Prices were up from early on Thursday, reacting to a raid on an oilfield in Libya by gunmen even though production was not affected.

An attack on a tanker off Nigeria and monetary easing by China that could boost on oil demand also provided support to crude.

The rally accelerated towards noon, after oil services firm Genscape reported a smaller-than-expected build in crude stockpiles at the Cushing, Oklahoma, delivery point for WTI in the four days since Jan. 30.

Market sources who saw the Genscape data said it estimated a build of about 550,000 barrels at Cushing. Traders had expected a spike of more than 1 million barrels in that period.

The smaller-than-expected Cushing build sharply narrowed the discount in WTI's front month to the second month <CLc1-CLc2>. Brent premium's to WTI <CL-LCO1=R> meanwhile, rose to over $6 a barrel, its widest since early November.

(By Barani Krishnan; Additional reporting by Alex Lawler in London and Jacob Gronholt-Pedersen in Singapore; Editing by William Hardy, Jason Neely, Meredith Mazzilli and Marguerita Choy)