The drawdown added to global supply concerns stoked this week by the temporary shutdown of production in the North Sea and Alaska, while cold weather in the U.S. Northeast also supported crude.

Oil prices have been steadily climbing since the third quarter of 2010 on signs the improving economy was spurring demand fuel growth, and that it would rise further this year.

While oil's climb toward $100 a barrel raised concerns about the impact of rising fuel costs on the economic recovery, top oil exporter Saudi Arabia -- which has said it prefers a $70-80 a barrel price range -- kept supplies to customers steady. [ID:nL3E7CA03H]

Brent crude LCOc1, the benchmark for Europe, the Middle East, and Africa, rose $1.19 to $98.80 a barrel by 1:25 p.m. EST (1825 GMT), after touching a 27-month high of $98.85 earlier.

U.S. crude CLc1 rose $1.02 to $92.13, after climbing to $92.39, near the $92.58 the Jan. 3 peak that is the highest since October 2008.

Bullish sentiment has been supported by a U.S. Energy Department forecast issued on Tuesday pointing to global oil demand growth accelerating with prices averaging at $99 a barrel by next year. [ID:nN11141290]

Global oil demand this year is forecast to reach a record 88.6 million barrels per day, following much faster demand growth last year than most analysts had expected. [O/POLL]

"Worsening sentiment is the only thing that could derail the price rally at the moment," said Carsten Fritsch, analyst at Commerzbank, who said $100 oil looked imminent.

"It seems only a matter of time if sentiment remains positive and more disruptions on the supply side come in."

Supply concerns eased somewhat after the restart of production at two North Sea oil fields, which had supported prices earlier in the week. [ID:nLDE70B0MG]

In addition, the operator of the Trans Alaska Pipeline System said throughput on the line had reached 400,000 barrels per day (bpd), about two-thirds of normal throughput, as part of a provisional restart plan after it was shut by a leak on Saturday. [ID:nN12215407]

BRENT-WTI SPREAD REMAINS WIDE

Concerns had been raised an extended loss of Alaskan oil could force oil refineries on the U.S. West Coast to look for alternatives in Russia and the Middle East, helping to extend Brent crude's premium to U.S. oil.

Brent's spread against the U.S. benchmark hit $6.82 a barrel on Wednesday, after shooting up to $7.02 on Tuesday, the widest spread since February 2009.

The spread had continued to widen since the start of the year because of high inventories at the key U.S. crude delivery hub at Cushing, Oklahoma, and tighter supply of Brent-related crudes.

U.S. crude oil stockpiles fell 2.15 million barrels last week, a million barrels more than expected, data from the U.S. Energy Information Administration showed. Distillate and gasoline supplies rose much more than forecasts.

Despite the build, U.S. heating oil firmed near fresh 27-month highs, lifted by forecasts of higher demand in the U.S. Northeast, the world's biggest heating oil market, as another fierce snowstorm pummeled the region overnight. 

**Additional reporting by Robert Gibbons in New York, Alex Lawler in London; Alejandro Barbajosa in Singapore; editing by Matthew Robinson and Marguerita Choy