Brent crude see-sawed on Thursday, as concerns about instability in the Middle East were offset by worries about the economic health of the eurozone following the resignation of Portugal's prime minister.
At 1110 GMT, May Brent was down 18 cents to $115.37 a barrel after earlier trading up on the day to $115.92.
Today we have a sideways move, a little bit up, a little bit down, because of the Portuguese prime minister's resignation yesterday, said Thorbjorn Bak Jensen, an oil market analyst at Global Risk Management.
U.S. crude was up 62 cents to $106.37, supported by a steep decline in U.S. gasoline stockpiles for the week to March 18. The fall and drove U.S. crude to its highest settlement since 2008 on Wednesday.
Technical factors are also supporting U.S. crude, analysts said. Now that it has broken above the $104 level, we will see a little bit more momentum kicking in, trying to take it through the $106 level, said Michael Hewson, an analyst at CMC Markets.
Brent on the other hand has little fresh momentum to take it higher, he said. Instead, the market is torn between problems in the euro zone and the ongoing conflict in the Middle East.
We have a tug of war between positive and negative factors for oil prices, said Carsten Fritsch, an oil analyst at Commerzbank.
The bullish factors are still in place: the war in Libya, unrest in other parts of the Arab world, a greater need for fossil fuels in Japan, and pretty bullish inventory data yesterday are all supportive of higher oil prices.
Fritsch said that despite the resignation of Portugal's Prime Minister Jose Socrates, which had weighed on oil overnight, oil prices could probably rise further.
The developments in Libya and the Middle East are still the most important factor to watch, he said.
Socrates resigned on Wednesday after the Portuguese parliament rejected his government's latest austerity measures, which were designed to avoid a bailout.
Eurozone leaders will meet in Brussels later today for a two-day summit to try to address the sovereign debt problems which have dogged the region.
Portugal has to meet a bond redemption of over 4 billion euros in mid-April but according to its constitution it does not have time to hold a general election before then.
The resignation of the Portuguese prime minister is creating some risk on/risk off (trading), depending on which way the wind is blowing, Bak Jensen said.
We have had some positive numbers this morning for German manufacturing and service PMI, but we still have this Portugal ghost hanging over us. What are they going to do?
MIDDLE EAST TENSIONS
Western warplanes hit Libya for a fifth night. The U.N.-backed assault has so far failed to stop Muammar Gaddafi's tanks shelling rebel-held towns or dislodge his tanks from Misrata port.
Syrian forces killed six people in an attack on protesters in a mosque complex in the southern city of Deraa, and later opened fire on hundreds of youths marching in solidarity, witnesses said.
Meanwhile in Yemen, presidential guards loyal to President Ali Abdullah Saleh clashed in the town of Mukalla with army units backing opposition groups and protesters demanding his removal.
Markets are being bid up more by negative psychology about the goings-on in the Middle East, than a compelling case from supply/demand fundamentals, Edward Meir, a senior commodity analyst at brokers MF Global, said in a note.
Short-term, we suspect the advance is getting somewhat over-extended... Having said that, any sell-off from here would likely be short-lived, as there are enough nervous investors out there to still be buying the dips. (Additional reporting by Alejandro Barbajosa; editing by Keiron Henderson)