Oil prices rose on Thursday morning after data showed that US crude inventories dropped and refinery demand was high, although the outlook remains for cheap oil as oversupply persists.

US crude inventories fell 4.3 million barrels last week, according to the Energy Information Administration (EIA), as refineries boosted throughput to a record level.

"The decline in crude stock was driven by a jump in refinery throughput to a record high of 16.8 million barrels," ANZ bank said.

Front-month US crude futures were trading at $51.94 per barrel at 0421 GMT, up 53 cents from their last settlement. Front-month Brent crude was also up half a dollar at $57.55 a barrel.

"As a result of this (US inventory data), we would believe that both WTI and Brent... should move upwards today," said Daniel Ang of Singapore-based Phillip Futures.

Despite Thursday's gains, US and Brent prices are down more than 17 and 15 per cent, respectively, from their June peaks as oversupply of around 2.5 million barrels per day remains in place and the market prices in the prospect of a gradual return of Iranian exports from 2016 following a nuclear deal between Tehran and six global powers.

Iran, a member of the Organization of the Petroleum Exporting Countries (Opec), has some of the world's biggest oil reserves. It exported almost 3 million bpd of crude at its peak, before Western sanctions over its alleged ambitions to build a nuclear bomb saw shipments collapse to about a million bpd over the last 2-1/2 years.

"Although Iran has around 20 million barrels of oil in storage, some of it is needed for operational reasons domestically and is therefore, not destined for export," energy consultancy Wood Mackenzie said, adding that it could take Iran until the end of 2017 to increase production by as much as 600,000 bpd.

Beyond Iran's impact on oil prices, the country offers big investment opportunities as it needs to modernise its sanction-hit oil sector.

"Tehran is eagerly poised to attract foreign investment and gain access to modern technologies in the whole energy chain," Wood Mackenzie said.

"Potential for investment in Iran is huge, three quarters of its combined oil and gas reserves - the third largest in the world - are yet to be produced," it added. – Reuters