Brent crude oil rose to six-month highs on Wednesday, propelled by falling inventories in the United States, optimism of a deal to bail out Greece and tension between Iran and the West.
Front-month Brent gained 20 cents to $116.43 a barrel by 5:17 a.m. ET, its seventh straight day of gains. It was on track for its highest close since early August.
U.S. March crude rose $1.02 to $99.43 a barrel, buoyed by an unplanned outage at a Canadian oil sands plant.
Demand sensitive assets like oil were supported, and the euro was at eight-week highs on hopes of a deal on a second bailout needed to avoid a messy Greek debt default.
The supply situation also helped lift prices. The American Petroleum Institute (API) reported a surprise drawdown of 4.5 million barrels in the week to February 3, defying a consensus forecast for an increase of 2.4 million barrels.
The U.S. government's Energy Information Administration (EIA) boosted its 2012 and 2013 forecasts for global oil demand growth, and said supply would tighten as gains in non-OPEC output lag, adding to support for oil prices.
In Europe meanwhile, there was also pressure on stockpiles as freezing temperatures forced some power providers to start up oil-fired power stations to meet consumer demand.
Investors were awaiting EIA data due at 10:30 a.m. ET for more detail on the supply picture in the United States, and International Energy Agency data from Europe on Friday to get a better for the outlook on demand.
The IEA report relates energy growth to IMF growth forecasts, which were reduced last month, so that may act as a cap on prices, said Andy Sommer, analyst at ELG in Dietikon, Switzerland.
Sommer added that slightly milder weather was forecast in Europe and said it was unlikely Brent crude would go much above $120 in the near future.
The Organisation of the Petroleum Exporting Countries is releasing its oil forecast on Thursday.
Brent's premium to U.S. crude oil narrowed to below $17 a barrel, after the spread had widened to more than $20 per barrel on Tuesday, its highest since October.
The spread narrowed after the bullish API data and news that a Canadian oil sands plant closure for a few weeks boosted U.S. crude.
The prospect of supply disruptions has put a floor under prices, with Iran's parliament saying on Tuesday it was ready to impose a ban on oil exports to the EU, while clashes in Nigeria are also worrying investors about potential supply problems.
Brent will consolidate in a range of $115.29 to $116.79 for one or two trading sessions before rising towards $118.65, while U.S. oil will edge up to $99.59 per barrel, as it has broken a resistance at $98.61, said Reuters market analyst Wang Tao.