In late-morning trade, New York’s main contract, light sweet crude for June delivery, was at 72.42 dollars a barrel, up 29 cents from 72.13 dollars in late New York. Brent North Sea crude for June delivery was at 72.63 dollars, up 19 cents.

Although the United States Department of Energy (DoE) reported Wednesday a rise in US stockpiles of energy products, dealers said the increase in supply may not meet higher demand.

"The data did show an increase in gasoline and crude,but I think that the key reason why the market rose is because of the change in demand," said Darius Kowalczyk a Hong Kong-based Senior Investment Strategist with CFC Seymour. "There is a big pickup in demand for both gasoline and crude as well," he said.

US crude oil reserves rose by 300,000 barrels to 347 million in the week to May 5, their highest level since May 1998. Kowalczyk said this increase was offset by higher demand for crude from US refineries.

"With US refineries coming out of maintenance ... they are burning more crude oil so demand for crude is also rebounding," he said. Similarly gasoline reserves, which rose 2.4 million barrels to 205.1 million barrels, were also offset by rising demand, Kowalczyk said. "The demand side it’s quite bullish and the commodities market is driven by demand, not supply, as supply is usually quite tight," he added.

Reports of the murder of an American oil worker in Nigeria also affected crude markets, Kowalczyk said. Nigeria is Africa’s largest oil producer and has seen its crude output cut by about 20 per cent as a result of rebel attacks on foreign-owned oil installations.

The Iranian nuclear crisis continues to add to nerves as Tehran faces possible UN sanctions. Iran is the world’s fourth biggest producer of crude and analysts fear it will retaliate against any UN sanctions by cutting crude supply. Iranian President Mahmoud Ahmadinejad brushed off threats of war against his nation as a "joke" and said Iranians would welcome sanctions.

Ahmadinejad, beginning the second day of his visit to Indonesia, said any military action against Iran would hurt the nations launching hostilities more than Tehran. Discussions among major powers over the issue have hit an impasse with Washington, along with Europe, favoring a United Nations Security Council resolution that could open the door to sanctions and even military action if Iran fails to comply.

Russia and China oppose such a resolution, saying they fear an escalation of the crisis.