Oil prices rose more than 1%, supported by lower U.S. crude stockpiles and a halt to exports from Iraq's Kurdistan region, which offset pressure from a smaller-than-expected cut to Russian supplies.
Brent crude futures rose 95 cents, or 1.2%, to $79.23 a barrel by 1:18 p.m. EDT (1718 GMT). West Texas Intermediate crude rose $1.15, or 1.6%, to $74.12.
Supporting prices, producers have shut in or reduced output at several oilfields in the semi-autonomous Kurdistan region of northern Iraq following a halt to the northern export pipeline, company statements showed. More outages are on the horizon.
Iraq was forced to halt around 450,000 barrels per day (bpd) of crude exports, or half a percent of global oil supply, from the Kurdistan region (KRI) on Saturday through a pipeline that runs from its northern Kirkuk oil fields to the Turkish port of Ceyhan.
However, "changes in Iraq's domestic politics may lead to a durable political settlement very soon", Citi analysts said Thursday, estimating that pipeline flows could increase by 200,000 barrels per day (bpd).
Also supporting prices was a Wednesday report from the U.S. Energy Information Administration that U.S. crude oil stockpiles fell unexpectedly in the week to March 24 to a two-year low.
Crude inventories dropped by 7.5 million barrels, compared with expectations for a rise of 100,000 barrels in a Reuters poll of analysts.
"Traders are starting to let yesterday's inventory numbers sink in a little bit," Price Futures Group analyst Phil Flynn said.
These factors offset bearish sentiment after a lower than expected cut to Russian crude oil production in the first three weeks of March.
The 300,000 bpd production decline compared with targeted cuts of 500,000 bpd, or about 5% of Russian output, sources familiar with the data told Reuters.
Markets are now waiting for U.S. spending and inflation data due on Friday and the resulting impact on the value of the U.S. dollar.
Meanwhile, OPEC+ is likely to stick to its existing deal on reduced oil output at a meeting on Monday, five delegates from the producer group told Reuters.
"While we think oil prices may remain volatile in the near term, we still expect rising Chinese crude imports and lower Russian production to lift prices over the coming quarters," UBS said.
