Volatile oil prices pick up on hopes China's easing will spur demand

SINGAPORE (Reuters) - Oil prices rose on Thursday, rallying a little after big losses in the previous session, after China took steps to pour fresh liquidity into the world's second-biggest economy to spur activity.

Oil markets remain highly volatile, with U.S. crude losing 9 per cent on Wednesday in one of its biggest routs ever as record high oil inventories in the United States cut short a four-day rally.

Prices rose again on Thursday on optimism that a system-wide cut in bank reserve requirements by China's central bank, the first in over two years, would spur economic activity and demand for energy.

Chinese stocks jumped more than 2 per cent on Thursday in reaction to the measure, which will free up 600 billion yuan (S$129.3 billion) or more held in reserve at Chinese banks.

Brent crude for March delivery was 74 cents higher at US$54.90 a barrel by 0233 GMT, after settling US$3.21 or 5.5 per cent lower.

U.S. crude traded 46 cents higher at US$48.91 a barrel. The contract had closed down almost 9 per cent on Wednesday after the large build-up in inventories.

U.S. crude stocks increased by 6.3 million barrels last week, rising for the fourth consecutive week to hit a record high of 413.06 million barrels, data from the Energy Information Administration showed.

Crude prices began to rise last week from near six-year lows, in part due to a reported downturn in U.S. rig activity that could eventually dampen rapid growth in shale oil production.

"However, production from existing completed wells is currently unaffected and is contributing to consistent weekly stock builds," analysts at BNP Paribas said in a note.

Moreover, seasonal demand is expected to fall in the second quarter as refineries enter spring maintenance. "The resulting drop in demand for crude at refineries is likely to lead to further large crude inventory builds," BNP Paribas said.

Negotiations continued between Royal Dutch Shell Plc and union leaders over a new wage contract for striking U.S. refinery workers. The two camps have been in a stalemate since walkouts early on Sunday at nine plants with about 10 percent of U.S. refining capacity.

In Libya, gunmen killed 12 people after storming a remote oilfield, raising further doubts about the likelihood of an increase in exports from the OPEC member.