Oil prices rose for the third straight day on Wednesday, to about $71 a barrel, after an industry report showed a drawdown in U.S. crude inventories and gave support to the view that demand was recovering.

U.S. crude for November delivery rose 10 cents to $70.98 a barrel by 1346 GMT (9:46 a.m. EDT), adding to Tuesday's gains of 47 cents. London Brent crude rose 22 cents to $68.78.

Oil's gains followed a report by the American Petroleum Institute saying crude stocks fell 254,000 barrels in the week to October 2, defying forecasts in a Reuters poll of analysts for a 2.2-million-barrel increase.

The API report is seen as a precursor to the more authoritative data issued by the U.S. Energy Information Administration (EIA), which will be released at 10:30 a.m. EDT on Wednesday.

Over the last two weeks, the largest pricing action has been on the release of the EIA data rather than on exogenous data and the same is likely today, said Olivier Jakob, managing director of consultants Petromatrix in Zug, Switzerland.

The EIA also raised its global oil demand estimate by 170,000 barrels a day for the fourth quarter on Tuesday and said it expected consumption to rise by 1.1 million bpd next year, versus earlier expectations of a 910,000 bpd rise.

EQUITIES SUPPORT FOR NOW

The second day of gains for Asian shares, on growing confidence that a global economic recovery is underway, helped to support oil prices, though gains were kept in check by a dip in European and U.S. equities.

Oil has rebounded from an 11-week low of around $66 in late September back above the $70 level, but some analysts caution it could slip back in the near term.

Oil looks like it's on shaky ground as we approach the U.S. third quarter (corporate) reporting season. A lot of near term price gains have been won off a rebounding equity market, said Mark Pervan, a commodities analyst at the Australia & New Zealand Bank.

I suspect the third-quarter reporting card will struggle to match the impressive second-quarter results, which were mainly driven by one-off aggressive cost cutting.

After having jumped by around 40 percent in the second quarter, oil prices have squeezed out a gain of only 1 percent in the last quarter, trading in a band of between $65-$75.

While the global economy is healing from the financial crisis, the recovery, along with energy demand, remains fragile.

A U.S. Federal Reserve official said on Tuesday that while the world's largest economy was clearly rebounding, it was too soon to begin to withdraw the Federal Reserve's massive support.

Weakness in the dollar has also supported commodities priced in the greenback in recent days as they become cheaper for holders of other currencies.

The dollar was slightly firmer on Wednesday, but gold jumped to another fresh record high of $1,408.20 an ounce. (Additional reporting by Fayen Wong in Perth; Editing by Anthony Barker)