Oil prices rose by 1 percent on Thursday as the equities markets rallied and as market participants weighed a rise in U.S. crude inventories and production against continued OPEC supply curbs.
WTI`s discount to Brent has grown to more than $5 a barrel, the biggest since January, making Brent-linked crudes less attractive to refiners than U.S. oil.
Prices for the more actively traded June Brent crude futures were up 69 cents, or 1 percent, at $69.45 by 1:32 p.m. EDT (1832 GMT), while the May contract expiring on Thursday was up 35 cents at $70.19.
West Texas Intermediate (WTI) crude futures gained 62 cents, or 1 percent, to $65.
Oil has risen about 4 percent since January, on track for the longest stretch of quarterly gains since late 2010.
"The equities market is rallying and that`s lending support to oil," said Philip Streible, senior market strategist at RJO Futures in Chicago. All three major U.S. stock indexes were positive on Thursday.
"The dollar is slightly in positive territory, but it`s not screaming like yesterday," which is also supportive to crude prices, said Streible. The dollar against a basket of currencies was up about 0.05 percent, after gaining 0.8 percent Wednesday. A weaker greenback makes dollar-denominated commodities cheaper for holders of other currencies.
Strong compliance on supply cuts from members of The Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia have supported prices. OPEC sources said the group and its allies are likely to keep their deal on cutting output for the rest of 2018 when they meet in June.
But rising inventories and production in the United States have pressured prices. Commercial U.S. stocks rose 1.6 million barrels in the past week, while output hit a record 10.43 million barrels per day (bpd).
"I looked at the inventory report as not bearish," said Bill Baruch, president of Blue Line Futures in Chicago. "We actually drew down more from products than from crude."
But, the gains may be fragile, said Petromatrix strategist Olivier Jakob.
"The price action last week was pretty clear. The objective on that move was to take out the highs of 2018, but that has not been done and the price action of the last three days has not been very convincing."
This week marked the launch of the Shanghai crude oil futures contract, which has lost about 10 percent since opening on Monday.
On Thursday, Reuters reported that China was taking its first steps to pay for imported crude oil in yuan instead of the U.S. dollar.