The fundamentals behind oil are likely to remain shaky in the longer-term as increasing U.S. output complicates Opec's [the Organisation of the Petroleum Exporting Countries] efforts to prop prices higher and rebalance markets.
On Wednesday, reports that Saudi Arabia's air defenses intercepted a missile launched towards the country by Houthi rebels in Yemen further stoked geopolitical tensions and supported prices.
The latest Middle East-related political risk factor is related to events in Syria, where a military confrontation may be brewing with the USA on the one side and Russia, Syria and Iran on the other.
Recent geopolitical threats have lifted oil prices out of the doldrums of the past few months, rocketing them up to highs not seen since late 2014. U.S. President Donald Trump spooked markets Wednesday by suggesting a missile strike could be imminent, but he walked back that rhetoric early Thursday.
USA crude production also rose to a fresh high of 10.53m barrels per day. "However, oil market fundamentals are tightening, and oil prices look set to be squeezed higher as long as OPEC sticks to its cuts".
Oil market observers are looking ahead to monthly reports from OPEC and the International Energy Agency, due Thursday and Friday, respectively, with an eye to potential revisions on the global oil demand.
Another damping factor was the U.S. Energy Information Administration's upward revision to its 2019 production forecast to 11.44 million barrels a day, from its previous figure of 11.27 million barrels.
With the markets reacting, oil prices rose to their highest in more than three years after Trump's latest comments.
US crude oil inventories rose by 3.3 million barrels to 428.64 million barrels, while USA crude production last week hit a record 10.53 million barrels per day (bpd).
Analysts had anticipated a decline of 189,000 barrels a day.