Oil prices rose on Thursday, boosted by a strong demand outlook in the United States after fuel inventories fell more than expected, and a weaker U.S. dollar.

Brent crude futures rose 34 cents, or 0.5%, to $71.12 a barrel by 0745 GMT, their highest since March 3. U.S. West Texas Intermediate (WTI) crude rose 42 cents, or 0.6%, to $67.58.

U.S. government data showed a larger-than-expected draw last week in distillate inventories, which include diesel and heating oil, which fell by 2.8 million barrels, more than the 300,000-barrel draw expected in a Reuters poll. [EIA/S]

"The U.S. oil demand outlook remains healthy despite declining passenger air travel volumes," JPMorgan analysts said in a note, adding that the slackening in U.S. travel activity did not signal a broader weakening in the demand outlook.

Global oil demand averaged 101.8 million barrels per day (bpd), an annual increase of 1.5 million bpd, analysts said.

However, U.S. crude inventories rose by 1.7 million barrels, beating expectations for a 512,000-barrel increase in a Reuters poll earlier.

A weaker U.S. dollar also contributed to the rise in oil prices, with the greenback on a downward trend since late February.

"Throughout the week, the weaker U.S. dollar seemed to provide support for U.S. dollar-denominated oil prices," said Priyanka Sachdeva, senior market analyst at Phillip Nova.

Oil investors remain hopeful about the prospect of the Federal Reserve easing interest rates by 50 basis points by the end of the year, she added.

However, some analysts expect a patchy price uptrend in the near term.

"I expect a bumpy uptrend in the oil market at the moment," said Kelvin Wong, senior market analyst at OANDA, adding that bullish price drivers are stimulus measures from China and the resumption of hostilities between Israel and Hamas.

Global risk premiums rose after Israel launched a new ground operation in Gaza on Wednesday after breaking a nearly two-month ceasefire.

The United States continued airstrikes on Houthi targets in Yemen in retaliation for the group's attacks on ships in the Red Sea. U.S. President Donald Trump has also vowed to hold Iran accountable for future Houthi attacks

Weaker near-term market drivers include an upcoming production increase among OPEC+ members and a likely weak flash reading of the S&P U.S. Global Services PMI for March, OANDA's Wong added. (Newsmaker23)

Source: Investing.com