Oil rebounded above $70 a barrel on Thursday, clawing back some of the previous session's losses, amid the market's exuberance over a global economic recovery getting underway, while a weak US dollar also lent support.

Oil settled down nearly 2 per cent on Wednesday after US government data showed larger-than-expected supply increases in gasoline and distillate fuels last week.

US crude for November delivery rose 59 cents to $70.15 a barrel by 0315 GMT. The contract closed $1.31 lower at $69.57 a barrel on Wednesday.

London Brent crude gained 82 cents to $68.02.

'Oil is helped by a weaker US dollar, while having a string of positive newsflow from different areas has also buoyed investors' sentiments,' said Benson Wang, a commodities trader at Commodity Broking Services in Sydney.

Wang said Alcoa's surprise third-quarter profit, along with Australia's better-than-expected unemployment numbers, has rekindled enthusiasm that the global recovery was gaining traction.

'Alcoa's results seems to have increased optimism that we might see some strong numbers coming out of the third-quarter results reason,' he said.

Alcoa Inc posted a surprise profit on Wednesday through cost cutting and higher aluminium prices after three consecutive quarterly losses, sending its stock 6 percent higher.

In Australia, employment surged past all expectations in September and the jobless rate dropped in what might be a turning point months earlier than anyone thought.

The US dollar was again on the defensive on Thursday, supported by an overall bullishness about a global recovery.

Still, some analysts have doubts on whether oil will rise beyond the $75-mark, as the market remains well supplied and the global economic recovery, along with energy demand, remains fragile.

'The road to recovery is unlikely to be as smooth as some expect and will come with a few bumps along the way. The hard data (factory orders, capital goods orders) have disappointed relative to the direction suggested by the new orders' components in the ISM manufacturing surveys,' Harry Tchilinguirian, an oil analyst at BNP Paribas said in a report.

The Energy Information Administration reported gasoline stocks leapt 2.9 million barrels last week, nearly three times the build that analysts had expected.

Distillate stocks -- which include diesel and heating oil -- rose by 700,000 barrels, more than double the forecast 300,000-barrel build. – Reuters