U.S. oil futures rose to a more than two-month high on Wednesday, bolstered by a fifth weekly crude inventory drawdown and strong domestic gasoline demand, amid ongoing supply concerns over U.S. sanctions on Iran that come into force in November.
Crude inventories fell 2.1 million barrels in the week to Sept. 14 to 394.1 million barrels, the lowest level since February 2015, EIA data showed. Analysts had forecast a decrease of 2.7 million barrels.
U.S. crude futures ended Wednesday's session up $1.27, or 1.8 percent, at $71.12, its best closing price since early July. The rise came after the U.S. Energy Information Administration said crude and gasoline stockpiles fell last week.
Crude inventories fell 2.1 million barrels last week to 394.1 million barrels, the lowest level since February 2015, EIA data showed. Gasoline stocks fell 1.7 million barrels versus forecasts for a 100,000-barrel drop.
"It was a squarely bullish report," said John Kilduff, a partner at Again Capital Management in New York. "The summer-like demand from drivers is proving unrelenting."
Gasoline consumption usually picks up in the summer and wanes in autumn, but demand remained strong in the latest week, estimated at 9.5 million barrels per day.
Brent crude futures were up about a quarter above $79 a barrel. On Tuesday, the global oil benchmark rose 1.3 percent on a media report that Saudi Arabia, the world's largest oil exporter, was comfortable with prices above $80, indicating the producer would not try to increase output to drive prices lower.
ANZ bank said in a note that investors took the report that cited unnamed sources as a signal Riyadh "won't be aggressively responding to the rise in prices with supply increases."
Consultant JBC Energy cautioned against reading too much into the report. "It may well be that too much attention is being put on these indirect anonymous statements," it said.
Reuters reported on Sept. 5 that Saudi Arabia wanted oil to stay between $70 and $80 to keep a balance between maximizing revenue and keeping a lid on prices until U.S. congressional elections.
The focus on oil supply has been reflected in the options market this week, where investors have scooped up large amounts of buy or call options, suggesting they see prices rising.
Data from the InterContinental Exchange showed open interest in calls that give the owner the right to buy Brent futures at $80 and $85 by next week grew by nearly 45 percent on Monday and Tuesday to an equivalent of 54 million barrels of oil.
"Whether or not this (price) development was justified, it is a supply-side development and the market has reacted to it," PVM Oil Associates strategist Tamas Varga said.
"Trade wars, if anything, should impact oil demand, but that's being completely ignored, which goes to tell me that the market is much more sensitive to supply-side developments ... I think that is going to remain the theme for the next six weeks until the next round of U.S. sanctions against Iran kick off."
The Organization of the Petroleum Exporting Countries and other producers including Russia meet on Sept. 23 in Algeria to discuss how to allocate supply increases within their quota framework to offset the loss of Iranian supply.
U.S. sanctions affecting Iran's oil exports come into force on Nov. 4. Although many buyers have scaled back purchases, it is unclear how easily other producers can compensate for any lost supply.
— CNBC's Tom DiChristopher contributed to this report.