Investors brushed off evidence of weak crude demand in the U.S. The Energy Department's Energy Information Administration said crude inventories rose last week by 2.5 million barrels and were up 7.5 million during the last four weeks.

"There is now enough crude oil on hand to cover the next 24.2 days of demand," wrote trader and analyst Stephen Schork, in his Schork Report. "That is the largest amount of forward cover for the month of August since Saddam sent his tanks rolling into Kuwait in 1991."

Benchmark crude for September delivery was up $1.26 to $71.42 a barrel by noon European electronic trading on the New York Mercantile Exchange. On Wednesday, the contract climbed 71 cents to settle at $70.16.

The IEA, based in Paris, said Wednesday it raised its global oil consumption forecast for this year and next. Despite the rosier outlook, the IEA still expects demand this year to fall 2.7 per cent as economies struggle to emerge from recession.

"We're forecasting an upswing in global oil demand from the second quarter into the fourth quarter," Barclays Capital said in a report. "The grounds are being laid for a sustained push to the upside."

Barclays expects oil to average $71 a barrel in the third quarter and $76 in the fourth.

Oil traders have also been watching global stock markets for signs of improving investor sentiment. The Dow Jones industrial average rose 1.3 per cent Wednesday, and most Asian indexes gained yesterday.

"It might just be hard to break away from the major trend where equities go up and oil follows," said Michael Sander of Sander Capital Advisors in Seattle. "I would bet more on oil going up than down at this point."

In other Nymex trading, gasoline and heating oil for September delivery rose by more than two cents to $2.05 and $1.92. a gallon. Natural gas for September delivery gained more than five cents to fetch $3.53 per 1,000 cubic feet.

In London, Brent crude prices rose $1.12 to $74.01 a barrel on the ICE Futures exchange.