Oil climbs after big losses on Wednesday; glut fears linger

Oil prices rose as much as 2 percent on Thursday, extending early gains as traders covered short positions a day after crude futures were hammered by weak US demand for fuel during the traditionally busy summer driving season.

Key crude benchmarks Brent and US West Texas Intermediate (WTI) lost about 4 percent on Wednesday as a raft of bearish US inventory data heightened concerns about a global glut.

Oil was also helped higher on Thursday as the dollar weakened on the pound's rally after the Bank of England's surprise decision not to cut rates.

A weaker dollar tends to make greenback-denominated oil more attractive to holders of other currencies. The UK central bank was widely expected to ease after Britain's vote last month to leave the European Union caused market turmoil.

The perception that the previous day's move was excessive also supported crude.

"It's always the case a day after a big rally or sell-off for people to feel it was overdone," said Phil Flynn, an analyst with Chicago brokerage Price Futures Group.

"The argument is also on what's the fair price for oil? I think $44 is a good support, as $40 or below will again deter investments."

Brent was up 90 cents, or 1.9 percent, at $47.16 a barrel by 12:12pm EDT (1612 GMT). It rose more than 2 percent at the session high, reaching $47.47.

WTI gained 80 cents, or 1.8 percent, to $45.55. The session peak was $45.80.

US crude stocks fell less than expected last week, while distillate inventories rose the most since January and gasoline stocks unexpectedly increased, the Energy Information Administration (EIA) said on Wednesday.

Many had expected record driving trips and low pump prices to boost gasoline usage this summer. A glut in refined products globally is putting crude under pressure, with Middle East grades in particular hit by low Asian demand.

Adding to the bearish picture, the International Energy Agency (IEA) said on Wednesday a persistent global crude glut weighed on oil despite demand growth and declines in non-OPEC production.

Data on Thursday from market intelligence firm Genscape showed a 171,511-barrels build at the Cushing, Oklahoma delivery hub for WTI futures during the week to July 12, traders said.

Technically, crude may be poised for another fall, said Tamas Varga of PVM Oil Associates in London, who said Brent could break below its 100-day moving average of $44.84 as early as next week.