Oil prices rose for a second straight day today as Europe moved closer to pumping aid to the region's troubled banks and US data showed jobless benefit claims rose less than expected last week.
By 5:15pm GMT Brent crude futures for November delivery rose $1.53 to $104.26 a barrel, climbing from an intraday low of $101.53.
US crude gained $2.05 to $81.73, jumping from an early low of $79.08.
Trading volume on Brent crude was around 472,000 contracts, 14% below its 30-day average. US crude volume was around 495,000 contracts, 23% below its 30-day average.
Trading was volatile, with prices falling early after the European Central Bank left interest rates unchanged and the bank's chief warned of more regional economic risks.
Then oil futures marched higher as investors waded back into riskier assets, helping lift global equities and major commodities such as copper, which rose to a week's high.
Worries about Europe's sovereign debt crisis, a drag on commodities and equities, eased when European Commission President Jose Manuel Barroso said the EU's top executive body proposed a coordinated recapitalization of banks.
Markets were further bolstered after German Chancellor Angela Markel said Europe should not hesitate to recapitalize its banks if this prevents greater economic damage.
New claims for US unemployment benefits rose less than expected last week, feeding hopes for an improved labour market on the eve of the September non-farm payrolls report.
"The markets are looking to embrace even the slightest improvement in the economy," said John Kilduff, a partner at hedge fund Again Capital in New York.
Friday's jobs report, an early indicator of how the economy fared last month, was forecast to show that nonfarm payrolls likely added 60,000 after being flat in August and that the unemployment rate remained steady at 9.1%.
Despite the day's sharp gains analysts saw more downside risk for crude futures, given economic weakness in the United States and the debt crisis in the euro zone.
Also, with some of the oil production curbed by the war in Libya and interruptions in the North Sea and Nigeria was now finding its way back into the market, the supply fundamentals for oil are "pretty strong right now," Exxon Mobil Corp Chief Executive Rex Tillerson said at the Washington Ideas Forum.
