Oil prices rose on Thursday on a strong U.S. demand outlook and a weak U.S. dollar after fuel inventories fell more than expected.

Brent crude futures rose 43 cents, or 0.6%, to $71.21 a barrel by 0423 GMT, the highest since March 3. WTI rose 38 cents, or 0.6%, to $67.54.

U.S. government data showed a larger-than-expected decline in distillate stocks, including diesel and heating oil, last week. Stocks fell by 2.8 million barrels, over an expected 300,000 barrel decline.

The outlook for U.S. oil demand remains healthy despite lower air passenger traffic volumes. The decline in U.S. travel activity does not signal a broader weakness in the demand outlook.

Analysts said global oil demand was averaging 101.8 million barrels per day (bpd), up 1.5 million bpd annually.

U.S. crude inventories rose by 1.7 million barrels, beating earlier expectations of a 512,000-barrel increase.

The dollar has been on a downtrend since late February, with a weaker greenback contributing to oil gains.

Investors are hopeful that the Federal Reserve will cut interest rates by 50 basis points by the end of the year.

Global risk premiums rose after Israel launched a new ground offensive in Gaza on Wednesday following its ceasefire violations and the US said it would hold Iran responsible for the Houthi attacks and resume airstrikes on Houthi targets in Yemen.

The good news, a halt to attacks on energy facilities in the war with Russia in Ukraine is likely to come quickly, with both sides moving closer to a ceasefire that could lead to sanctions relief and a return of Russian supplies to the market.