Oil prices rallied for a fourth day running on Thursday, edging above $71.50 a barrel after bullish inventory data and soothing words from OPEC whetted investor appetite for crude.
The oil producers cartel left output unchanged, as expected, with Saudi Oil Minister Ali al-Naimi saying prices were being driven by economic recovery, and that high levels of inventory had become irrelevant to the market.
The lack of more aggressive action reflected a belief that demand will be sufficient in pulling down the overhang in the market, David Kirsch, director of market intelligence services at PFC Energy in Washington, said.
It's a shift from previous OPEC policy in being more proactive against their downside risks and obviously the state of the economy played a part in this decision.
NYMEX crude for October delivery stood at $71.71 a barrel by 0220 GMT, up 40 cents from Wednesday's settlement. London Brent crude rose 22 cents to $70.05 a barrel.
Also bullish was a big fall in U.S. crude stocks, with the American Petroleum Institute reporting a 7.2 million barrels drawdown in the week to September 4, far more than the 1.5 million barrel forecast in a Reuters poll.
However, this was partly offset by a 3.3 million barrels jump in distillate stocks, far exceeding the forecast for an 800,000 barrel increase, while gasoline stocks rose 571,000 barrels against the forecast for a 1.3 million barrel drawdown.
More inventory data lands on Thursday with the Energy Information Administration's report at 1500 GMT.
On Wednesday the government body predicted global oil demand through next year will be will be weaker than previously forecast while supplies will be higher.
The EIA cut its forecast for world oil demand growth in 2010 by 30,000 barrels per day and raised its forecast for global oil production growth by 150,000 bpd.
The dollar held steady against the euro, trading around $1.4560 after the greenback plunged to it lowest this year earlier this week and sent oil prices soaring.
Traders noted rising interest in front-month WTI versus longer dated futures in the past month or so and a narrowing in the contango, or discount for near-dated oil.
The one lesson we all learnt from the great price crash is that all markets are correlated. The gains we are seeing in oil right now are driven by equities as much as anything and people are buying prompt crude to ride the wave we are seeing in stocks, a Sydney-based energy trader said.
(Editing by Michael Urquhart)