Singapore - Brent crude edged up to a more than three-month high above $115 per barrel on Thursday, as the U.S. Federal Reserve's pledge to stick to its bond-buying stimulus plan and upbeat euro zone data fuelled optimism about oil demand.
But a surprise contraction in US economic growth and a surge in crude stocks to a seasonal record last week in the world's top oil consumer kept a lid on gains.
"After many years of fears that the economy is going to crash, it seemed like the worst is behind us. So better news out of China and expectations for recovery in the United States caused risk money to come back into equities, commodities and energy," said Tony Nunan, an oil risk manager at Mitsubishi.
Brent rose 19 cents to $115.09 a barrel by 07:31, after hitting $115.25 earlier in the day - the highest since October 16. US crude was down 7 cents at $97.87, after reaching a more than four-month high on Wednesday.
Riskier assets, like oil, metals and equities, have been boosted in recent days by a slew of economic data indicating global growth was gaining traction, and more recently by the Fed's accommodative policy.
The Fed on Wednesday kept its monthly bond-buying plan while indicating a recent stall in US economic growth was likely temporary and predicting the nation's job market would continue to improve at a modest pace.
US private-sector employers added 192 000 jobs in January, more than economists were expecting, the ADP National Employment Report showed on Wednesday.
Traders are now waiting for key US nonfarm payrolls data on Friday and official manufacturing data out of China that is expected to show factory activity picking up pace.
China's promising economic growth forecast for 2013 has raised expectations for robust demand for fuel from the top energy consumer, while data from the eurozone that show economic sentiment improving more than expected across all sectors in January has also helped brighten the outlook for oil demand.
The solid ADP employment data and improvements in European confidence have helped markets shrug off the modest contraction in US Q4 GDP, Jason Schenker, president of Texas-based Prestige Economics, said in a note.
"The implication is clear: equity markets and some commodities could go significantly higher this year."
Supply worries stemming from geopolitical tensions in the Middle East continued to underpin oil prices.
Israeli warplanes bombed a convoy near Syria's border with Lebanon, sources told Reuters, apparently targeting weapons destined for Hezbollah in what some called a warning to Damascus not to arm Israel's Lebanese enemy.
But Mitsubishi's Nunan cautioned that the oil market "feels oversupplied...so beats me why (prices) are so strong".
US commercial crude inventories increased by nearly 6 million barrels in the week to January 25, led by a 1.9 million barrel rise on the Gulf Coast, according to data the US Energy Information Administration. Analysts polled by Reuters had forecast a 2.6-million-barrel build in stockpiles.
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