(Reuters) - Oil prices rose toward $108 on Thursday, helped by bigger-than-expected stock draws in the United States and tensions around Iran, while stronger German data offset some of the negative sentiment generated by Wednesday's poor bond auction.
Brent crude oil futures rose 71 cents to $107.73 a barrel at 1255 GMT after pushing up over $1 to an intraday high of $108.09.
U.S. crude was up 73 cents at $96.90 a barrel after earlier touching $97.18. But traders said volumes should be thin as the U.S. market is closed for the Thanksgiving holiday.
We're due for a pretty quiet couple of days - the markets won't stray too far ... we are more likely to see a narrower trading range, said Tony Machacek, a trader at Jefferies Bache.
Crude stockpiles in the United States unexpectedly fell week-on-week by 6.2 million barrels as refinery rates rose and crude imports dropped , the Energy Information Administration said on Wednesday. The consensus forecast was for a 500,000 barrel build.
Oil is benefiting from the EIA inventory report which showed a surprisingly sharp draw in U.S. crude oil stocks, which have fallen below the five-year average for the first time this year, said Carsten Fritsch, an analyst at Commerzbank in Frankfurt.
As we head into winter with the lowest stocks in several years on crude and heating oil/distillates this is keeping a floor under the prices, agreed Michael Poulsen, oil analyst at Global Risk Management.
Fritsch also pointed to recovering stock markets and a higher euro/dollar as more positive economic data from Germany helped offset some of the negative sentiment generated by Wednesday's failed bond auction.
The FTSEurofirst 300 .FTEU3 was up 0.78 percent at 1229 GMT and the dollar .DXY was down 0.39 percent against a basket of currencies after German business sentiment rose in November for the first time since June.
The closely-watched IFO business climate index bucked expectations to rise to 106.6 from 106.4 in October.
The poor German bond auction had raised fears the euro zone debt crisis was beginning to threaten Europe's biggest economy. French President Nicolas Sarkozy will press German Chancellor Angela Merkel on Thursday to let the European Central Bank act decisively.
Speaking at a conference in Vienna, Fatih Birol, the International Energy Agency's chief economist, warned that the high oil price could strangle efforts to get the global economy back on its feet and may also hamper Asia's ability to help the West exit its crisis.
Given the negative economic backdrop, Fritsch said oil prices had held up reasonably well.
I would have expected them to come under a lot more pressure, he said. But tighter supplies and geopolitical risk regarding Iran are helping prices stay elevated.
MIDDLE EAST TENSIONS
EU countries have been discussing an extension of sanctions on Iran over its nuclear program and France has been pushing for this to include a ban on imports of Iranian oil.
France is also seeking Arab support for a humanitarian corridor in Syria, the first time a major power has swung behind international intervention in the eight-month uprising against President Bashar al-Assad.
Meanwhile, in Saudi Arabia, two people have been killed and three wounded in an exchange of fire between Saudi security forces in the oil-producing Eastern Province and what the interior ministry called gunmen serving a foreign power.
But there were further signs that Libyan output was picking up pretty quickly following the end of the civil war, with its Mellitah Oil and Gas Company restarting production from the offshore Bouri field at a rate of 10,000 barrels per day.
The National Oil Corporation also issued a tender to sell up to one million barrels of Sharara grade crude oil, the first for this grade since production resumed.