Oil futures settled higher Thursday, buoyed by a weekly decline in oil production and expectations for further stimulus measures by the European Central Bank, which could lift energy demand. A rally in the stock market also helped to improve the energy-demand outlook, but oil prices trimmed gains as equities lost steam and the U.S. dollar continued to strengthen. “Given that the recent bearish news such as the sharp increase in U.S. oil inventories have not been enough to push prices further lower, it looks like most of the bad news is priced in now,” said Fawad Razaqzada, analyst at Forex.com. “If this view is correct, then a sharp correction to at least the $50 handle seems to be the most likely outcome for WTI prices.” “The price action suggests a bottom may have been formed when prices could not hold below $40 a barrel for too long, which of course led to that sharp upsurge last week,” he said. WTI oil prices recently saw a three-day rally that lifted prices by a total of more than 27%. Still, Razaqzada said he doesn’t believe oil will see significantly higher price levels “because of the still-weak fundamentals.”

The U.S. Energy Information Administration on Wednesday reported that U.S. crude stockpiles rose by 4.7 million barrels for the week ended Aug. 28. It also reported, however, that total domestic production fell 119,000 barrels to 9.22 million barrels a day.

WTI prices saw an intraday reversal to finish higher Wednesday. “Most of the activity this week has been technical in nature, due in part to the recent move to a new low,” said Darin Newsom, DTN senior analyst. Prices settled below $39 on Aug. 24, the first time that is happened since February 2009.

Oil traders may also have been encouraged by increasing pressure on the Organization of the Petroleum Exporting Countries to cut production. But Newsom warned that with the U.S. dollar strengthening, dollar-denominated oil may soon weaken again. The dollar index moved higher ahead of Friday’s U.S. nonfarm-payrolls report on expectations that the jobs report will be positive and bolster the case for a U.S. interest rate increase in September. That capped gains for oil.