WTI crude oil rose about 3 percent on Thursday as a reported drawdown of stockpiles in the Cushing delivery point for U.S. crude futures boosted optimism that a supply glut was easing.
Fighting in Iraq that raised worries about the security of Middle East crude shipments also boosted oil.
The dollar's retreat took some pressure off oil too. The dollar snapped a broad three-day run-up and also fell against the euro for the first time in a week, making commodities denominated in the greenback more affordable to holders of other currencies.
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Inventories of U.S. crude in Cushing, Oklahoma fell by almost 740,000 barrels between Friday and Tuesday, trade sources said, citing a report by market intelligence firm Genscape.
The report added to the fervor of oil bulls, already inspired by Wednesday's U.S. government data showing the third straight weekly decline in crude stockpiles across the United States.
"All these drawdowns indicate the supply glut we've been having is easing, so not surprisingly more people are going long oil and those who aren't are covering shorts," said Phil Flynn, analyst at the Price Futures Group in Chicago.
In Iraq, the city of Ramadi fell to Islamic State on Sunday in the most significant setback for Iraqi security forces in nearly a year.
"Brent is getting a bit of impetus from the threat Islamic State is posing in Iraq," said Christopher Bellew, senior broker at Jefferies Bache. "I can see prices moving up further from here on geopolitics towards $70."
Brent has rallied to above $66 from a near six-year low of about $45 in January.
Brent was even higher in June, peaking at $115 before halving by the year-end, after the Organization of the Petroleum Exporting Countries dropped its policy of cutting output to support prices. OPEC meets on June 5 and is not expected to alter its policy, in the interest of defending market share.
U.S. crude inventories are up about 20 percent from year-ago levels, suggesting vulnerability to a move lower, analysts at Commerzbank said in a report.
"We continue to envisage downside risks," Commerzbank said.