Oil price increased to $66 a barrel on Thursday following signs of supply glut concerns easing and fall in US crude stock.
Brent crude increased 80 cents at $65.83, while US crude rose 69 cents at $59.67, Reuters reported.
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A supply report released by the US Government highlighted a dip in crude inventories for a third week.
US crude stocks dropped nearly 2.7 million barrels last week, through it is still 90 million bbls compared to the stockpile during year ago period.
Jefferies Bache senior broker Christopher Bellew told the news agency: "Brent is getting a bit of impetus from the threat Islamic State is posing in Iraq."
Oil prices also picked up as Islamic State militants again attacked the city of Ramadi, creating a major blow for Iraqi security forces in nearly a year.
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By GlobalDataStability of oil flows from the Organization of the Petroleum Exporting Countries (OPEC) second-largest producer Iraq created uncertainty due to such repeated attacks in the country.
Prices however got some check after Chinese factory activity contracted for a third month, according to a private survey that further highlighted a decline oil demand could dip.
Owing to a supply glut, oil price declined from $115 in June 2014 which further deepened after the OPEC dropped its policy of cutting output in order to back prices.
