Oil prices inched higher on Thursday, extending gains from the previous day as a larger-than-expected draw in U.S. crude stocks signalled firm demand, while investors remained cautious about the Iran-Israel ceasefire and stability in the Middle East.

Brent crude futures rose 53 cents, or 0.8%, to $68.21 a barrel by 0630 GMT. U.S. West Texas Intermediate (WTI) crude gained 56 cents, or 0.9%, to $65.48 a barrel.

Both benchmarks climbed nearly 1% on Wednesday, recovering from early-week losses after data showed resilient U.S. demand.

"Some buyers are favouring solid demand indicated by falling inventories in U.S. weekly statistics," said Yuki Takashima, economist at Nomura Securities.

"But investors remain nervous, seeking clarity on the status of the Iran-Israel ceasefire," he said, adding that market attention is now shifting to OPEC+ production levels.

Takashima forecast WTI would likely return to the $60-$65 range, its pre-conflict levels.

ANZ analysts said that with the de-escalation of conflict between Iran and Israel, the market's focus had returned to fundamentals, and pointed to data showing U.S. crude oil inventories fell for a fifth straight week.

"US government data showed the US driving season is in full swing after a slow start," ANZ analysts said in a note.

U.S. crude oil and fuel inventories fell in the week to June 20 as refining activity and demand rose, the Energy Information Administration (EIA) said on Wednesday. [EIA/S]

Crude inventories fell by 5.8 million barrels, the EIA said, exceeding analysts' expectations in a Reuters poll for a 797,000-barrel draw.

Gasoline stocks unexpectedly fell by 2.1 million barrels, compared with forecasts for a 381,000-barrel build as gasoline supplied, a proxy for demand, rose to its highest since December 2021.

On Saturday, Igor Sechin, the head of Russia's largest oil producer Rosneft, said OPEC+, which groups together the Organization of the Petroleum Exporting Countries and allies including Russia, could bring forward its output hikes by around a year from the initial plan.

Meanwhile, U.S. President Donald Trump hailed the swift end to war between Iran and Israel and said Washington would likely seek a commitment from Tehran to end its nuclear ambitions at talks with Iranian officials next week.

Trump also said on Wednesday that the U.S. has not given up its maximum pressure on Iran - including restrictions on sales of Iranian oil - but signalled a potential easing in enforcement to help the country rebuild.

Source: Investing.com