Oil traded near the highest close since May after US stockpiles dropped to the lowest in four months and China signalled it may take more steps to boost growth in the world's second-biggest economy.
Futures were little changed after climbing 1 per cent yesterday.
Inventories shrank 3.7 million barrels and total oil use reached the highest level in nine months last week, the Department of Energy said in a report.
Slowing inflation gives China more room to adjust monetary policy, Chinese premier Wen Jiabao said, according to state radio.
Israel's ambassador to the US said his country would be willing to strike Iran's nuclear facilities.
"The key thing is the US inventory report and some expectations in the market for stimulus in China, Europe and the US," said Victor Shum, the managing director of IHS Consulting in Singapore.
"Also adding support to prices are comments from Israel that they will strike Iran."
Oil for September delivery gained 2 cents to $94.35 a barrel in electronic trading on the New York Mercantile Exchange at 2.05 pm in Singapore.
It earlier rose as much as 28 cents, or 0.3 per cent. Yesterday's settlement at $94.33 was the highest since May 14.
Prices are down 4.5 per cent this year.
Brent crude for September settlement, which expires today, rose 11 cents to $116.36 after climbing 2 per cent yesterday on the London-based ICE Futures Europe exchange.
The more actively traded October contract was at $114.41.
Bloomberg
