Oil prices recovered slightly on Thursday following sharp losses a day earlier on signs of weak energy demand in the United States, traders said.
Brent North Sea crude for delivery in January rose 40 cents to 72.79 dollars a barrel in morning London trade.
New York's main futures contract, light sweet crude for January, climbed 26 cents to 70.93 dollars a barrel. In Asian trading hours the contract hit a two-month low point of 70.44 dollars.
Oil prices had skidded on Wednesday -- the sixth session in a row in which they had dropped -- after official data showed a bigger-than-expected rise in US stockpiles of refined fuel that renewed concerns about slack energy demand in the world's biggest economy.
Market sentiment was hit by the US Department of Energy's (DoE) latest weekly report on petroleum stockpiles, showing an unexpected rise in distillate stocks, by 1.6 million barrels in the week ended December 4, instead of a drop of 500,000 barrels forecast by most analysts.
Distillates include heating fuel, which usually sees rising demand at this time of year amid the start of northern hemisphere winter weather.
"Certainly, elevated distillate inventories remain a major concern with seasonal demand still very weak," VTB Capital commodities analyst Andrey Kryuchenkov said on Thursday.
The DoE meanwhile added on Wednesday that US crude reserves, fell by 3.8 million barrels last week.
Still, crude stocks were 4.4 percent higher than their year-ago level and above the upper limit of the average range for this time of year.
Over the past four weeks, the US consumed on average 18.5 million barrels of petroleum products a day, a decline of 3.0 percent from the same period a year ago.
"Demand remains anaemic," said Ellis Eckland, an independent analyst, adding that "people are realising that US demand is not recovering."
"You've got a very weak physical market driven by weak demand, and then you're not getting support from the dollar either, that contributed to the weakness."
Crude futures had also sank on Tuesday owing to a stronger dollar, soft US energy demand and deepening market concerns about soaring government debt in Dubai and Greece, traders said.
Saudi Arabia's oil minister Ali al-Naimi told a Dubai conference on Wednesday that Gulf economies remain strong, even as Dubai's stock market spiralled downwards over debt default fears.
Oil traders were also looking ahead to an upcoming OPEC meeting that will decide on producers' crude output levels.
Al-Naimi -- whose country is de facto head of OPEC -- has said that the oil producers cartel should not raise its output quota at a meeting later this month as the current oil price is "close to the target" at between 70 and 80 dollars a barrel.
Several member nations of the Organization of Petroleum Exporting Countries have said they want to keep production unchanged at their December 22 meeting in Luanda, Angola because they feel current crude prices are satisfactory.
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