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NEW YORK (Reuters) - Crude oil futures rose on Thursday as a solid pickup in U.S. home sales added to economic optimism following the U.S. Federal Reserve's vow a day earlier that it would take further stimulus action if needed to keep the recovery going.
In volatile trade, oil gave up early gains after a weak report on jobless claims, then rebounded to session highs on the housing data.
Oil advanced with a broad rise in key commodities, such as copper, reflected in a 0.40 percent gain in the Thomson Reuters-Jefferies CRB index .CRB.
Overall, oil's gains were limited as data showed economic sentiment in the euro zone fell more than expected in April.
As was the case on Wednesday, the oil markets received support from stronger equities and, to some extent, a weakened dollar, which improved investors' risk appetite. .N <USD/>
Comments by Fed Chairman Ben Bernanke on Wednesday "are good for oil: people think that if growth derails in the U.S., the Fed is ready to step in with further Quantitative Easing (QE), which gives very strong support to commodities", Danske Bank's chief FX and commodities analyst Arne Lohmann Rasmussen said.
An industry report showing pending sales of previously owned U.S. homes rose more than 4 percent last month to a near two-year high offered a brighter outlook for the housing market.
"This is a positive note as an improvement in economic data adds support to risk assets," said Sean McGillivray, vice president and broker at Great Pacific Wealth Management in Grants Pass, Oregon.
But U.S. initial claims for jobless benefits fell only slightly last week, reflecting a struggling jobs market that could crimp energy demand in the world's No. 1 oil consumer.
In London, ICE Brent crude for June delivery settled at $119.92 a barrel, gaining 80 cents for its highest close since April 13. It climbed earlier to a session peak of $120.17, the highest intraday price since April 16.
Brent finished up for the third time in five sessions, aided by delays in North Sea Forties crude oil loading in May due to production issues at the Buzzard oilfield.
U.S. June crude futures gained 43 cents to end at $104.55, the highest settlement since April 2, after rising to a session high of $104.92, just below its 50-day moving average of $105.06. The contract gained for the fifth straight session.
Brent's premium against U.S. crude CL-LCO1=R widened to $15.37 at the close, from $15 on Wednesday.
The widening followed a hefty 547,000-barrel increase, to 41.75 million barrels, in stockpiles at the delivery hub for U.S.-traded crude futures in Cushing, Oklahoma last week. That was the highest level since the record 41.9 million barrels posted in the week to April 9, 2011, government data showed.
Brent's trading volume was nearly 13 percent above its 30-day trading average, according to Reuters data. U.S. crude lagged, with dealings down 30 percent from its 30-day average.
The recent stalling in the price of U.S. crude between $102 and $105 has caused a drop in volatility, according to a closely watched indicator.
The Chicago Board Options Exchange's Oil Volatility Index .OVX fell to a record low at 24.60 percent, reflecting the tight trading range.
The index's downtrend began on April 11, when it peaked at 31.79 percent.
The index represents implied volatility in U.S. crude oil futures and is a mathematical measurement of traders' perceptions of risk in the oil markets.
A monthly Reuters poll of analysts showed that Brent crude futures are expected to average $117.30 per barrel this year, $2.60 higher than in the March survey.
Analysts polled based their forecast on ongoing production outages in Brent oilfields and the prospect that a European Union ban on Iranian oil imports, which takes effect on July 1, will increase demand for Brent crude.
Despite the bullish forecasts for the full year, many of the 38 analysts polled see Brent softening in the second quarter, saying the recent rise in prices could affect demand.
U.S. crude was forecast to average at $105.60 for the year, $1 higher than the previous month's projection, the poll showed.
Meanwhile, oil investors continued to watch developments in Iran, which has agreed to resume talks with world powers about its disputed nuclear program.
Iran and Western nations have shown interest in a Russian proposal to help defuse tensions spawned by the program, a Russian diplomat said.
But even with this potential softening of the positions, many market watchers believe the Iranian tensions, with the EU's upcoming embargo, remain supportive for Brent.
Additional reporting by Robert Gibbons and Jeffrey Kerr in New York, Zaida Espana in London; Editing by Marguerita Choy and Dale Hudson