TOKYO: Oil rose on Wednesday as worries about an increase in supplies from Iran were offset by optimism about improving U.S. fuel demand that was reinforced by a drop in weekly inventory estimates.
Brent crude oil futures for July rose 44 cents, or 0.6%, to $69.09 a barrel by 0710 GMT, while U.S. West Texas Intermediate (WTI) crude for July was at $66.35 a barrel, up 28 cents, or 0.4%.
Both benchmarks had edged higher on Tuesday, ending at their highest levels in a week, amid hopes for higher demand during the northern hemisphere's summer driving season and a lifting of coronavirus curbs.
U.S. crude oil and fuel inventories fell last week, said two market sources, citing Tuesday's American Petroleum Institute figures.
Crude stocks fell by 439,000 barrels in the week ended May 21. Gasoline inventories fell by 2 million barrels and distillate stocks fell by 5.1 million barrels, the data showed, according to the sources.
"The API data was good," said Kazuhiko Saito, chief analyst at commodities broker Fujitomi Co, predicting oil prices to rise toward $70 a barrel on expectations of recovering fuel demand.
Iranian government spokesman Ali Rabiei said on Tuesday he was optimistic over Tehran reaching an agreement soon at talks with world powers to revive a 2015 nuclear deal, although Iran's top negotiator cautioned that serious issues remained.
Iran and global powers have negotiated in Vienna since April to work out steps that Tehran and Washington must take on sanctions and nuclear activities to return to full compliance with the 2015 nuclear pact with world powers.
The latest round of talks has resumed in Vienna this week after Tehran and the U.N. nuclear agency extended a monitoring pact on the Middle Eastern country's atomic programme.
Analysts have said Iran could provide about 1 million to 2 million barrels per day (bpd) in additional oil supply if a deal is struck and sanctions lifted.
"Without clarity on the fate of the Iran nuclear talks, it is difficult for investors to move either up or down," said Hiroyuki Kikukawa, general manager for research at Nissan Securities.
"But oil prices are expected to hold near the current high levels as expectations of recovering fuel demand in the United States and Europe, especially toward later this year with a pick-up in jet fuel demand, will offset concerns over return of Iranian supply," he said.
Goldman Sachs has said it expects oil prices to climb to $80 per barrel in the fourth quarter, arguing that the market has underestimated a rebound in demand, even with a possible resumption of Iranian supply. - Reuters