Crude oil futures were lower in Europe on Thursday, but the market was less volatile with Chinese traders away from their desks for national holidays and global markets holding steady.
Prices have fallen as a result of a huge increase in US oil stocks last week, although they've found some support from the recovery in equity markets. On Wednesday, the Dow Jones Industrial Average rose 1.8 per cent, halting a three-day slide.
The global oil benchmark, Brent crude, was trading down 0.69 per cent at $US50.13 a barrel, while the US benchmark is down 0.18 per cent at $US46.04 a barrel.
Oil is likely to continue to trade lower on Thursday, as the market refocuses from the equity rally back to the US inventory numbers, said Tamas Varga, an analyst at PVM Oil Associates.
Despite a recent uptick in the oil price, analysts like Mr Varga believe that oil markets will remain bearish given the continued excess supply.
"I have not seen any change in the fundamental oil picture," he said.
Most Asian markets were higher on Thursday following the rally in US stocks. Markets in China and Hong Kong were however closed Thursday for a national holiday.
The greenback is broadly stronger ahead of Friday's US non-farm payrolls report on expectations that the jobs report will be positive and bolster the case for a US interest rate increase in September. Barring any supply shocks, oil markets will also be watching currency movements and the jobs data very closely for directional cues, traders said.
Thursday trading was relatively calm after a volatile trading session for oil on Wednesday. Prices fell nearly 5 per cent during the day before surging to finish the day up nearly 2 per cent. The rally came despite influential data from the US Energy Information Administration that showed US oil stockpiles rose by 4.7 million barrels. Analyst expectations had been for an increase of only 100,000 barrels.
The news of increased stockpiles should have been "extremely bearish" but a recovery in equity markets after last week's steep sell off gave prices support, Phillip Futures said in a daily note.
Meanwhile, narrowing margins have forced Asian oil refineries across China, Japan, South Korea, Thailand and Taiwan to trim operations in recent weeks, which has started reducing crude oil demand in Asia.
"This was one of the reasons crude prices started to fall, even before the latest round of China fears emerged," energy consulting firm Energy Aspects said in a weekly update.
It said Asian imports of West African crudes for September loading fell by 20 per cent from a month earlier to the lowest since May 2014, and rates of Asian and Middle Eastern crude grades in particular have weakened significantly. Lower oil demand is bearish for prices.
However, US gasoline demand may manage to eke out a couple more weeks of gains on increased driving around the upcoming Labor Day weekend, Societe Generale said in a report.
"In the near term, we anticipate little in the global oil fundamentals to provide any sustainable uplift for prices as refinery maintenance gets underway and product demand enters a seasonal lull," the bank added.
Nymex reformulated gasoline blendstock for October -- the benchmark gasoline contract -- was steady at $US1.4297 a gallon, while October diesel traded at $US1.6043, 0.3 per cent lower.
ICE gasoil for September changed hands at $US489.50 a metric ton, up $US12.75 from Wednesday's settlement.
