Oil rose to hold above $69 on Wednesday after a report showing a drop in US gasoline stockpiles signalled a glut centred on the world's top consumer will ease as motor fuel demand reaches its summer peak.

Prices slumped more than 2 per cent on Monday as investors shunned riskier asset seeking the relative safety of the dollar and gold as concern spread about the health of European banks and tension between North and South Korea escalated.

But a late rebound in US equity markets lifted sentiment in the oil market, aided by a larger-than-expected decline of 3.2 million barrels in US gasoline stockpiles last week, reported by industry group the American Petroleum Institute.

And crude inventories at Cushing, Oklahoma, the pricing point for US crude, fell from record levels, the API said.

US crude for July delivery climbed as much as $1.38 to $70.13 a barrel and was up 77 cents at $69.52 at 0300 GMT. ICE Brent crude gained 44 cents to $69.99.

'Although Cushing is still at a very high level, stocks will stop increasing,' said Keichi Sano, general manager of research at SCM Securities in Tokyo.

'The point is that the US economy is not too bad. The sentiment of the market is too bearish due to EU problems and that affects people's attitude to take on risk. But it's already factored into the price, and $70 will be good support this time.'

The US driving season, when gasoline demand peaks as summer vacationers take to the roads, runs from the Memorial Day holiday in late May to the Labour Day holiday in early September.

US refineries are also cranking up operations as they return from spring maintenance, absorbing larger volumes of crude.

Analysts had expected US gasoline stockpiles to have declined by just 200,000 barrels, the average of a Reuters poll showed. Government statistics from the Energy Information Administration will follow on Wednesday at 1430 GMT.

The API said distillates including heating oil and diesel rose by 1.5 million barrels versus expectations of no change, while the nation's crude stockpiles rose 616,000 barrels. At Cushing, stocks fell 772,000 barrels from a record 37.99 million, Institute said. – Reuters