Oil hit a six-week high on Wednesday, closing in on a 3-year peak set in late January, on a surprise decline in U.S. inventories, strong compliance on OPEC production cuts, and persistent concern related to the Iran nuclear deal.
Brent crude futures rose $2.05, or 3 per cent, to settle at $69.47, nearly a 7-week high.
U.S. West Texas Intermediate (WTI) crude futures gained $1.63, or 2.6 per cent, to settle at $65.17, their highest since Feb. 2.
Those increases put both benchmarks into technically overbought territory for the first time since January, and boosted the premium of the Brent front-month over WTI to its highest since the start of February.
Data released by the U.S. Energy Information Administration (EIA) on Wednesday morning showed a surprise 2.6 million barrel draw in crude inventories. Analysts had expected a 2.5 million barrel build.
"A few things happened," said Jim Ritterbusch, president of Ritterbusch and Associates, referring to the EIA data.
"Crude imports dropped by half a million barrels per day, that contributed to the draw. We saw refinery runs increase more than expected by around 400,000 barrels per day so that ate up a lot of crude. And exports were up slightly," he said.
Oil also got a boost after the U.S. Federal Reserve raised interest rates on Wednesday and forecast at least two more hikes for 2018.
"On the back end of the Fed meeting, the dollar is getting under pressure, and that is going to work as a reverse correlation to crude oil prices," said Bob Yawger, director of energy futures at Mizuho in New York.
A falling dollar versus a basket of other currencies makes commodities cheaper for holders of other currencies since they have to spend less to buy the same amount of the commodity.
The Organization of the Petroleum Exporting Countries (OPEC) said on Wednesday its members and allies achieved record compliance in February to their deal to cut global supplies, lifting the market.
Meanwhile, concerns that the United States could reimpose sanctions on Iran loom.
Energy consultancy FGE said new U.S. sanctions on Iran could result in a 250,000 to 500,000 bpd drop in its exports by year-end, compared with crude exports of roughly 2.0 million to 2.2 million bpd since early 2016, when sanctions were lifted.
"Even though you do see signs that the market is lax on the physical side, do you go aggressively bearish when you have the potential for something happening between the U.S. and Iran?"
Bearish concerns have largely been fueld by surging U.S. crude output.
Wednesday's EIA data, in addition to showing inventory draws, also showed that weekly crude output had hit an all-time high.
"So far, the market is sort of ignoring the increase in production," said Ritterbusch.
"We now have production above 10.4 million bpd and it's going to keep rising; and the market is eventually going to have to reckon with that," he said.