Brent above $110

Motorists are shown at gas pumps at a Chevron gasoline station in Burbank29 May 2014, News Wires – Brent futures held near $110 per barrel on Thursday on hopes of improved demand from the world’s top oil consumer, as a sharp fall in US gasoline stocks added to recent data pointing to a stronger economy.

The brighter demand outlook is supporting prices, already at elevated levels due to supply disruption concerns from Libya and a widening rift between Russia and the West over Ukraine.

Investors still see the market as prone to a correction as some believe recent gains are overdone.

Brent crude traded $0.04 up at $109.85 per barrel by Thursday morning, rising to as much as $110, after settling $0.21 down.

US oil gained $0.16 to $102.88, after ending down $1.39 as traders booked profits ahead of a government report that is expected to show a build in overall crude stocks.

“Fundamentals haven’t changed drastically, we know there are still issues in Libya and Ukraine,” Newedge Japan commodity sales manager Ken Hasegawa told Reuters. “Both crudes are likely to fall because there have been lot of gains since the early part of May.”

The US benchmark fell more sharply than Brent overnight because it failed to break past key resistance at $105 per barrel, Hasegawa said.

The contract may now slide further to below $100, he said. Similarly, the European benchmark may slip to $107.

Brent has recovered nearly 3% from an intraday low of $106.85 touched on May 1, while the US benchmark has gained over 4% in the same period.

That increase, without any change to fundamentals, is making both contracts vulnerable to a correction, he said.

Crude stocks in Cushing, Oklahoma, the delivery point for the US benchmark, fell by 1.5 million barrels, data from industry group the American Petroleum Institute showed.

That is helping overshadow the overall rise in inventories by 3.5 million barrels in the week to 23 May to 383.9 million, compared with analysts’ expectations for an increase of 483,000 barrels.

Investors are now awaiting data from the Energy Information Administration due later today to gauge the demand outlook in the US.

Additional support is coming from the worsening crisis in Libya. Libya’s acting prime minister, Abdullah Al-Thinni, refused to hand over power to a newly elected premier after questioning his legitimacy in a deepening confrontation among the OPEC nation’s rival factions.

The North African state, struggling with unrest since a 2011 war ended Muammar Gaddafi’s rule, now has two prime ministers and a parliament deadlocked by splits among Islamist, anti-Islamist and regional adversaries.

Investors are also watching the situation in Ukraine, where relative calm returned to the streets of Donetsk after the biggest battle of the pro-Russian separatist uprising in eastern Ukraine.

Pro-Moscow gunmen have declared the city of a million people capital of an independent Donetsk People’s Republic.

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