Crude prices rose for a third day in early Asian trade on Wednesday as a halt to some exports from Iraqi Kurdistan raised concerns of tightening supply and market sentiment improved as fears of a banking crisis eased.
Brent crude futures rose 42 cents, or 0.5 per cent, to $79.07 a barrel at 0046 GMT. West Texas Intermediate US crude climbed 59 cents, or 0.8 per cent, to $73.79 a barrel.
"Worries over reduced supply from Iraq's Kurdistan region and a relief in financial markets worried about the banking sector turmoil continued to boost investors' risk appetite," said Satoru Yoshida, a commodity analyst with Rakuten Securities.
"Expectations that the US Federal Reserve will keep a cautious stance in raising interest rates because of banking stress also increased hopes for stronger global economy and oil demand," he said, predicting the bullish tone would continue this week.
Oil prices have been rallying after Iraq was forced to halt exports of about 450,000 barrels per day (bpd) from its northern Kurdistan region through Turkey after an arbitration decision confirmed Baghdad's consent was needed to ship the oil.
Barclays said on Tuesday that any protracted outage of Kurdish exports through the end of the year would imply a $3 a barrel upside to the bank's $92 a barrel Brent price forecast for 2023.
Monday's announcement that First Citizens BancShares Inc will acquire deposits and loans of failed Silicon Valley Bank spurred optimism about the condition of the banking sector that has roiled financial markets.
A drawdown in US crude oil inventories last week also lent support.
US crude oil inventories fell by about 6.1 million barrels in the week ended March 24, according to market sources citing American Petroleum Institute figures on Tuesday. Gasoline inventories fell by about 5.9 million barrels, while distillate stocks rose by about 550,000 barrels.
Analysts had expected US crude oil stockpiles to have risen last week, while distillate and gasoline inventories were seen down. The US Energy Information Administration will release its weekly report at 10:30 am (1430 GMT) on Wednesday.
On the supply side, Russian Deputy Prime Minister Alexander Novak said on Tuesday that Moscow needed to focus on boosting energy exports to so-called friendly countries and noted that Russian oil supply to India registered a 22-fold jump last year.