By Georgina McCartney
HOUSTON (Reuters) -Oil prices ticked higher on Thursday as U.S. job data eased demand concerns and escalating tensions in the Middle East helped prices bounce back for a third straight session, after hitting an eight-month low on Monday.
Brent crude futures rose 57 cents or 0.73% to $78.90 a barrel by 11:31 a.m. EDT. U.S. West Texas Intermediate crude rose 87 cents, or 1.16%, to $76.10.
Prices were buoyed on Thursday after data showed the number of Americans filing new applications for unemployment benefits fell more than expected last week, suggesting fears the labour market is unravelling were overblown.
"The latest US data on jobless claims indicates still a growing U.S. economy, reducing some of the oil demand concerns," UBS analyst Giovanni Staunovo said.
Investors were also digesting a 3.7 million barrel drop in U.S. crude inventories last week reported by the Energy Information Administration on Wednesday, a drop which far exceeded analysts' expectations and marked a sixth straight weekly decline to six-month lows. [EIA/S]
Elsewhere, the killing of senior members of militant groups Hamas and Hezbollah last week raised the possibility of retaliatory strikes by Iran against Israel, stoking concerns over oil supply from the world's largest producing region.
"It will spike the price of crude oil if there is an Iranian retaliation on a large scale and I think that is what everyone is most worried about,” said Tim Snyder, chief economist at Matador Economics.
Also lending some support, Libya's National Oil Corporation declared force majeure at its Sharara oilfield from Tuesday, a statement said, adding that the company had gradually reduced the field's production because of protests.
Analysts at Citi said there was a possibility of a bounce in prices to the low to mid-$80s for Brent.
"Upside risks in the market remain, from still-tight balances through August, heightened geopolitical risks across North Africa and the Middle East, the possibility of weather-related disruptions through hurricane season and light managed money positioning," Citi said.