Oil prices rose this evening as traders digested news of a shock fall in US crude inventories, and after the Federal Reserve vowed to hold near-zero interest rates for the next two years.
But the energy market trimmed some of its earlier gains as traders worried over the impact of ongoing global economic turmoil which has sent world stock markets plunging once again.
Brent North Sea crude rose $2.30 to $104.85 a barrel this evening, having earlier peaked at $107.11. US crude gained $1.92 to $81.22. It had earlier leapt as high as $82.90.
The US government's Department of Energy announced this afternoon that American crude inventories tumbled by 5.2 million barrels in the week ending August 5.
That confounded market expectations for an increase of 1.1 million barrels, and indicated stronger than expected demand in the world's largest energy consuming nation.
Meanwhile, the International Energy Agency cut its estimate for global oil demand this year by 100,000 barrels per day because of a downward revision of demand in the second quarter, high prices and 'slowing economic growth'.
But the IEA raised its 2012 forecast by 100,000 barrels per day, anticipating that Japan will increase oil consumption to compensate for the loss of nuclear-generated electricity in the aftermath of the deadly March earthquake.
The IEA's new forecasts put demand this year at 89.5 million barrels per day, up 1.2 mbd or 1.4% from 2010, with 2012 rising to 91.9 mbd, up 1.6 mbd or 1.8% from this year.
The IEA is the energy monitoring arm of the Organisation for Economic Co-operation and Development, or OECD, which groups 34 of the world's advanced economies.
