Oil turns positive in volatile trading session

LONDON (Reuters) - Oil inched up on Thursday, reversing initial losses in thin, volatile trading due to the U.S. Thanksgiving holiday.

Prices added to gains of more than 3 percent triggered by positive U.S. economic data during Wednesday’s session, while in Europe the focus remained on the strength of other peripheral euro zone members after debt Ireland’s bailout.

U.S. crude for January was up 36 cents at $84.22 a barrel by 1132 GMT, up from earlier lows of $83.45.

ICE Brent rose 41 cents to $86.25.

Volume was just over 20,700 lots by the same time, compared to an average daily trading of around 315,000 lots over the past year, according to Reuters calculations.

Prices are set to remain volatile in light volume as the New York Mercantile Exchange (NYMEX) combines trades for Nov. 25 and Nov. 26 into one single trading session because of Thursday’s Thanksgiving holiday.

“Oil prices will fluctuate today, but in the end we likely end near the previous close, changes throughout the trading session may prove to be more erratic due to lower liquidity as result of U.S. markets being closed for Thanksgiving,” BNP Paribas’ head of commodity markets’ strategy Harry Tchilinguirian said.

Tchilinguirian expects that euro zone debt developments together with China’s inflation prospects will be the main challenges to risk-appetite, which has been the driver behind the recent oil price increase.

Currently, analysts at Commerzbank and Petromatrix see price support at around $80 a barrel.

“The risks for the market, including Ireland and (the threat of conflict in) Korea are still there, and yesterday’s DOE report was also quite bearish, so I can’t find any convincing reason why oil prices climbed to $84,” Commerzbank oil analyst Carsten Fritsch said, although he sees support at $80 a barrel.

“Technically, the action of the last two days definitely print out a very strong defense of 80.50 $/bbl as a support,” Petromatrix’ Olivier Jakob said in a note.

Ireland unveiled a 15 billion euro belt-tightening plan, but failed to quell fears other euro zone members will run into debt difficulties.

Debt worries kept the euro close to a two-month low, while the dollar index, a measure of its performance against six other major currencies, inched down by 1131 GMT.

Oil tumbled to 2010 lows under $65 in May as the Greek debt crisis dampened confidence about the global economic recovery, and rebounded to a two-year high of $88.63 on Nov. 11.

Earlier this week, prices dropped to near $80 after North Korea’s deadly artillery barrage against a South Korean island that boosted the value of the dollar and reduced the appetite for riskier commodity assets.

Initial jobless benefits claims in the U.S. fell to their lowest level in more than two years last week while consumer spending rose for a fourth straight month in October, reports showed on Wednesday, fuelling hopes the economic recovery is strengthening.

U.S. crude oil stockpiles rose 1.03 million barrels in the week to Nov. 19 as crude imports jumped by more than a million barrels per day, the U.S. Energy Information Administration said on Wednesday.

Gasoline stocks rose 1.91 million barrels, the EIA said, against expectations for a 600,000-barrel draw, and distillate stocks fell 541,000 barrels, much less than analysts’ expectations for a larger 1.2 million-barrel draw.