(REUTERS) -- Crude oil futures rose on Thursday, extending gains from the previous session on optimism related to the U.S. Federal Reserve's vow to quickly move should the economy weaken and on a solid pickup in the U.S. home sales in March.

Oil's initial gains were slashed after a weak report on jobless claims, but rebounded to session highs on the upbeat housing data.

As was the case on Wednesday, the oil markets received support from stronger equities and, to some extent, a weakened dollar, which improved investors' risk appetite. 

(Fed Chairman Ben) Bernanke's comments are good for oil: people think that if growth derails in the U.S. the Fed is ready to step in with further Quantitative Easing (QE), which gives very strong support to commodities, Danske Bank's chief FX and commodities analyst Arne Lohmann Rasmussen said.

The central bank's commitment to keep rates low and to act further should the economy weaken lifted global equities and the euro. The central bank's policy meeting concluded on Wednesday.

A U.S. industry report showed sales of previously owned U.S. homes rose more than 4 percent to a near two-year high last month, offering a brighter outlook for the slow-recovering housing market.

But U.S. initial claims for jobless benefits fell only slightly last week, raising disappointment among investors as it reflected a struggling jobs market that could affect energy demand going forward in the world's No. 1 oil consumer.

In London, ICE Brent crude for June delivery traded up 54 cents at $119.66 a barrel by 12:20 p.m. EDT. It climbed earlier to a session high of $120.17, highest since April 16. If the gains hold, Brent will finish the day up for the third time in five sessions.

U.S. June crude futures gained 45 cents at $104.57, after rising to a session high of $104.92, the highest since April 17 and just below its 50-day moving average of $105.06. The contract is on track to end the day higher for the fifth straight session.

The recent stalling in the price of U.S. crude between $103 and $105 has caused a drop in volatility.

The Chicago Board Options Exchange's Oil Volatility Index .OVX fell to its lowest level in nearly five years on Thursday at 24.99 percent.

The index represents implied volatility in U.S. crude oil futures and is a mathematical measurement of traders' perceptions of risk in the oil markets. The current downtrend in the index dates back to April 11, when the index peaked at 31.79 percent.

OIL OUTLOOK

A monthly Reuters poll of analysts showed that Brent crude oil futures will average $117.30 per barrel this year, $2.60 higher from the March survey.

Analysts polled based their forecast on ongoing production outages in Brent oilfields and the prospect that a European Union ban of Iranian oil imports that takes effect on July 1 will increase demand for Brent crude.

Despite the bullish forecasts for the full year, many of the 38 analysts polled see Brent softening in the second quarter, saying the recent rise in prices could affect demand.

Meanwhile, oil investors continued to closely watch developments in Iran, which has agreed to resume talks with world powers about its disputed nuclear program.

Iran and Western nations have shown interest in a Russian proposal to help defuse tensions spawned by the program, a Russian diplomat said.

But even with this potential softening of the positions, many market watchers believe the Iranian tensions, with the European Union's upcoming embargo of Iranian oil exports, set for July, remain supportive for Brent.

(Additional reporting by Robert Gibbons and Jeffrey Kerr in New York, Zaida Espana in London; Editing by Bob Burgdorfer)