Brent crude held below $103 a barrel today, retaining most of its sharp gains from the previous session, when an interest rate cut by the European Central Bank boosted investors' appetite for riskier assets.
The decision came a day after the Federal Reserve recommitted to its aggressive stimulus programme, helping Brent trim losses for the week to stand down just 0.4 per cent, against a decline of more than 3 per cent at the end of Wednesday.
"Europe has always been about austerity, spending cuts and raising taxes, but, with this rate cut decision, we see a genuine shift towards a focus on growth," said Ben Taylor, sales trader at the Sydney-based CMC Markets.
Brent crude was 18 cents lower at $102.67 a barrel by 7.42am, while US crude for June delivery was down 16 cents at $93.83 a barrel.
Both contracts jumped around 3 per cent overnight in their biggest single-day rally in almost six months.
Oil prices got a shot in the arm after the ECB cut interest rates to record lows yesterday and US jobless claims dropped sharply to a five-year low, indicating the job market was still healing in the world's largest economy and top oil consumer.
The ECB, which cut its main rate by a quarter percentage point to 0.5 per cent, said it would prime banks with as much liquidity as they needed until at least July 2014 and look at ways to boost lending to smaller companies, the lifeblood of Europe's economies, but which have been starved of credit in many countries.
"This will likely encourage banks to lend and it will benefit small- and medium enterprises. If they expand and then hire, it will go towards bringing down the unemployment number," CMC Markets' Taylor said.
Share markets across Asia were mostly higher, with the MSCI's broadest index of Asia-Pacific shares outside Japan rising 0.4 per cent.
In commodities, copper extended gains and was nearing the $7,000-a-tonne price critical to market bulls. It rose 2.2 per cent to 6,996.25, continuing to recoup a chunk of its losses earlier this week.
"In conjunction with recent moves from the Bank of Japan and US Federal Reserve, ultra-accommodate G3 policy looks set to remain in place for some time, which should be supportive for commodities," ANZ Bank said in a research note to clients.
With the ECB and Fed decisions out of the way, investors are now turning their attention to key US nonfarm payrolls data expected later in the day.
A Reuters poll showed that US nonfarm payrolls may have risen by 145,000 in April after hitting a nine-month low of 88,000 in March, but a lower-than-forecast increase in private hiring from Wednesday's ADP National Employment Report raises the risk of a smaller number.
"This is going to be key for the week, if we get a really strong number, then we are going to see even further momentum on oil," Mr Taylor said.
But weak manufacturing activity in the United States and China is still clouding the outlook for oil demand from the top two consumers.
"I think the PMIs which we've seen this week still remind us that in China we need to see further evidence of stabilisation, and in the United States we want to see signs that are a little less stop-start," Mr Taylor said.
Reuters
