(Reuters) - Brent crude futures climbed towards $114 per barrel on Thursday, buoyed by hopes the European Central Bank will announce details of how it plans to tackle the euro zone's crippling debt crisis at a meeting later in the day.
Europe's debt woes and a slow global economic growth has fuelled worries about the demand outlook for commodities, but these concerns are expected to ease slightly if the ECB starts a new bond-buying program to help cut the borrowing costs of Spain and Italy.
Brent crude futures had climbed 44 cents to $113.53 per barrel by 0706 GMT, off a session high of $113.96. U.S. crude gained 60 cents to $95.96.
"Investors are pricing in (hopes for) the ECB meeting tonight," said Natalie Rampono, a commodity strategist at ANZ.
"A positive response in both the ECB meeting and U.S. payroll data due later will be supportive of oil prices. If we see disappointment in the data or the meeting, however, there will be the risk of a sell-off."
The key U.S. non-farm payrolls number is scheduled for release on Friday. A soft report could strengthen the case for a third round of monetary easing, also known as quantitative easing (QE3), by the Federal Reserve.
"Further price direction is likely to come from any additional details from the ECB on how they intend to tackle the euro crisis, as well as any hints of quantitative easing by the U.S. Fed," National Australia Bank analysts wrote in a note on Thursday.
"Either event could cause a sizeable move in prices. Balancing these competing influences, we expect a quarter average Brent price of US$109 per barrel in December."
The euro held firm near its two-month peak after rallying sharply in the previous session ahead of the ECB meeting.
Also supporting oil prices, U.S. crude stocks fell sharply last week as Hurricane Isaac's passage through the Gulf of Mexico shut in production and closed ports, data from the industry's American Petroleum Institute showed.
Crude inventories fell by 7.2 million barrels in the week to August 31, a much steeper drop than analysts' expectations for a drawdown of 5.3 million barrels.
The Energy Information Administration's (EIA) report on oil inventories will follow at 1500 GMT on Thursday, delayed by a day after Monday's U.S. Labor Day holiday.
Most eastern Louisiana refineries affected by Isaac have restarted production since the storm passed, and producers have continued to restore offshore production.
About 680,749 barrels per day of oil production remained offline on Wednesday, according to the U.S. government, just under half of Gulf of Mexico offshore output.
As of Wednesday, the storm had shut in a total of 11.2 million barrels of oil production since August 25.
Adding to geopolitical risks that could boost oil prices further, the U.N. nuclear watchdog showed a series of satellite images on Wednesday that fuelled suspicion of clean-up activity at an Iranian military site it wants to inspect, Western diplomats said, but Tehran's envoy dismissed the presentation.
The pictures, displayed during a closed-door briefing for member states of the International Atomic Energy Agency, indicated determined efforts in recent months to remove any incriminating evidence at the Parchin site, the diplomats said.
Iran is under growing pressure over its disputed nuclear program and companies are cutting ties with its vital shipping sector, which transports most of its crude oil, for fear of losing lucrative U.S. business.
A Russian firm has decided to stop verifying safety and environmental standards for one of Iran's biggest shipping groups, becoming the latest international company wary of being caught up in Western sanctions on Iran.
(Editing by Clarence Fernandez and Himani Sarkar)