Investors are still worried about a huge oversupply in the oil market.

Reuters/London

Oil prices jumped more than 4% on Thursday after a rally in equity markets and an unexpected fall in US crude inventories, but worries over the health of the Chinese economy and a global oil glut kept the outlook uncertain.

World stock markets rallied on Thursday as Chinese shares recovered on hopes that government measures to stimulate the economy would pay off, while the dollar also rallied as risk aversion eased.

Oil markets moved up from six-and-a-half-year lows reached earlier this week, but investors are still worried about a huge oversupply in the oil market which is depressing oil for immediate delivery and filling stockpiles worldwide.

"The trend is strong and down. However, do not be wrong footed by a correction higher," PVM Oil Associates technical analyst Robin Bieber said. "Few markets head forever in one direction with no respite."

Front-month Brent, the global oil benchmark, was up $1.75 at $44.89 a barrel by 0930 GMT. US crude was up $1.60 at $40.20 a barrel.

Phillip Futures oil analyst Daniel Ang in Singapore said he saw the current rally as a pause in a downward trend, rather than a longer term shift upwards.

"We would not underestimate the current bearish momentum and still believe that it is possible to see prices break supports of $38 and $45 for WTI and Brent," Ang said.

Oil prices were supported by US stockpiles data on Wednesday showing US crude inventories fell 5.5mn barrels in the week to August 21, the biggest one-week decline since early June.

Analysts had expected an increase of 1mn barrels.

But some analysts said the inventory fall may be connected to lower import figures for last week and may not mark the start of a trend.

Many are bracing for a rise in stocks over the coming months as refiners shut for seasonal work.

"Without the sharp fall in imports, crude oil stocks would have been rather flat last week," Commerzbank oil analyst Carsten Fritsch told the Reuters Global Oil Forum.

SEB commodities analyst Bjarne Schieldrop said the US stockpiles figures were not particularly bullish:

"The upturn is more due to broad based sentiment rising," Schieldrop said. "I still expect Brent will break below $40."

Standard Chartered on Thursday cut its 2015 Brent forecast by $10 a barrel to $54, and slashed its 2016 Brent forecast by $20 to $63.

The bank thinks US crude will average $48 in 2015 and $58 in 2016.