Oil rose on Wednesday on the back of strong gasoline draws and higher refinery utilisation rates in the United States, but gains remain capped by weak economic data and a well supplied physical market.
U.S. gasoline and distillate stocks drew down last week against expectations of a build. Gasoline inventories slumped 1.72 million barrels in the week, more than analysts' expectations for a 1.1-million barrel build.
Meanwhile, refinery rates surged to their highest in nearly five years, while crude inventories slipped last week, much less than forecast.
"Brent is rising with sharply lower gasoline stocks at the start of the driving season," said Eugene Weinberg at Commerzbank. "Refinery utilisation is also at its highest in five years, which is bullish news, as it will translate into increasing crude consumption."
Brent crude rose 64 cents to $97.78 a barrel by 1523 GMT. It had slipped to as low as $96.67 earlier in the session.
U.S. crude rebounded, rising 32 cents to $83.64 per barrel, having been as low as $82.15.
Data on Wednesday showed U.S. retail sales fell for a second straight month in May reigniting fears about the health of the world's largest economy.
The euro extended gains against the dollar, further supporting oil prices, to hit a global session high as investors pared hefty bearish positions and as U.S. stocks turned positive.
OPEC and IEA
Investors are also watching for any change in the Organization of the Petroleum Exporting Countries' output policy at its meeting in Vienna, with price hawks calling on Saudi Arabia to rein in excess production.
OPEC and the U.S. government agreed on Tuesday that global oil markets could weaken further in the second half of the year, with prospects for demand dimming.
Brent has fallen from a peak of more than $128 a barrel in March, prompting calls from exporters such as Venezuela to stem a slide that has knocked $30 a barrel off prices.
Saudi Arabia has lifted output to 10 million barrels a day, its highest in decades, to help nurse global economic growth in what Saudi Oil Minister Ali al-Naimi has called a "type of stimulus" for the economy.
The International Energy Agency, which advises 28 countries on energy security, warned against calling the market over-supplied, pointing out Iran's oil exports have fallen by an estimated 40 percent since the start of the year as Western sanctions tear into its oil industry.
The IEA report was seen as effectively calling on OPEC to maintain current high oil output levels to help ailing Western economies struggling with high energy prices.
"The IEA confirmed that there are stock builds and they don't want to say that the market is over-supplied, but it's not a game-changer in terms of prices. and the market is still well-supplied," Olivier Jakob at Petromatrix in Zug said.
He added that a focus on Greek parliamentary elections at the weekend was likely to drive further volatility.
The elections, which may determine whether the country stays in the euro zone, are weighing on crude prices, because further chaos in the single currency region may affect global demand for oil.
Raising the stakes further, the UK's finance minister said Europe may need to sacrifice Greece's membership in its single currency bloc, and Austria's finance minister said Italy might need a financial rescue because of its high borrowing costs.
While the Austrian comment drew a sharp denial from Italy, it stoked fears that Europe is far from ending 2-1/2 years of turmoil.