The U.S. Federal Reserve said on Wednesday it would support growth in the world's top oil consumer if necessary as it left the door open for another round of monetary easing, raising hopes of higher energy demand.
The Fed's comments are supporting crude oil prices, despite a higher-than-expected U.S. inventory figure, said Miguel Audencial, a trader with CMC Markets in Sydney.
Brent crude slipped 2 cents to $119.10 a barrel by 0642 GMT after settling up 55 cents at $119.12 on Wednesday.
U.S. crude edged up 11 cents to $104.24. The benchmark settled at $104.12, up 57 cents.
Asian shares followed Wall Street higher on the Fed's reassurance, giving a further boost to sentiment in the oil markets.
The prospect of a loss of supplies from Iran has helped drive oil markets higher this year, but evidence of rising output from fellow OPEC producers has capped gains.
While Iranian output has slipped ... Iran's gentle downwards slope has been more than made up by increases elsewhere, said analysts at Barclays Capital in a report.
Total OPEC output is running at about 37.5 million barrels per day, its highest level ever, the report said.
Iran is storing as much as 33 million barrels of crude on tankers as it faces increasing difficulties in selling its oil.
Europe's July 1 oil embargo and U.S. and European financial sanctions prompted by Iran's nuclear program have seen Tehran's oil sales drop to most Western destinations and drawn promises from some Asian buyers that they will cut purchases.
U.S. INVENTORIES, EURO ZONE WEIGHS
A large buildup in U.S. crude inventories is also weighing on prices, although a drawdown in refined fuel stocks provided some relief, U.S. government data showed on Wednesday.
Crude stocks rose almost 4 million barrels in the week to April 20, up for a fifth week in a row, the U.S. Energy Information Administration (EIA) said. The average forecast in a Reuters poll had called for a 2.7-million-barrel build.
U.S. gasoline stockpiles fell by a larger-than-expected 2.24 million barrels, a 10th consecutive week of decline.
Market participants will be looking to U.S. unemployment claims and pending home sales data later on Thursday to provide further insight into the health of the world's largest economy.
Only a surprisingly negative figure will reduce the market's optimism caused by the updated Fed outlook. Although don't be surprised that concerns over Europe will once again ruin the party, said Audencial.
The prospect that euro zone economies would slip into a recession due to the ongoing sovereign debt crisis have weighed on markets for months.
There are growing expectations in financial markets that the European Central Bank will have to ride to the rescue again with Spain under intense pressure and the Dutch government having collapsed over budget plans.