Oil rose more than $1 a barrel to above $114 on Wednesday, extending an earlier gain, after a US government report showed declines in fuel inventories in the world's top consumer.
Gasoline stocks fell by 6.4 million barrels, the Energy Information Administration said, more than the 2.1 million barrel decline analysts expected. Distillates inventories unexpectedly fell.
"Draws are bullish across the board. Lower refinery output and lower imports led to the draws in the products for the past week," said Tim Evans, energy analyst at Citi Futures Perspective in New York.
US crude rose $1.14 to $114.15 a barrel by 5 p.m. (Malta time). Yesterday, it settled $1.44 lower, after falling to $112.31, the lowest since early May. London Brent rose 82 cents to $111.97.
Crude oil stocks fell by 400,000 barrels, the EIA said. That was double the decline analysts had expected.
Some analysts said the report was less supportive for prices than it looked.
"Even though these numbers look bullish on the surface, the drop in supplies is probably due to refinery closings and import disruptions ahead of Tropical Storm Edouard," said Phil Flynn of Alaron Trading.
Increasing signs of weakening demand as economies slow in leading consumer markets have weighed on oil, which has fallen sharply since reaching an all-time high of $147.27 on July 11.
Oil demand in the United States fell by an average 800,000 barrels per day year-on-year during the first half, marking the sharpest fall in 26 years, the EIA said yesterday.
A relatively strong dollar, which has risen since the start of this month as investors see signs of the economic slowdown in the United States spreading to Europe has also pressured oil and other commodities.
On the supply side, hostilities between Russia and Georgia, a key alternative supply route for oil and gas from the Caspian to Europe, have left the market unmoved.
BP PLC closed an oil pipeline and a natural gas pipeline running from its Caspian Sea fields through Georgia but said neither had been damaged.
A third BP pipeline that runs through Georgia, the Baku-Tblisi-Ceyhan oil pipeline pumping Azeri crude, was shut last week following an explosion in Turkey.