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By Bozorgmehr Sharafedin

LONDON -Oil prices rose for a third day on Wednesday as the easing of lockdowns in the United States and parts of Europe heralded an increase in fuel demand over the summer months and offset concerns about rising COVID-19 infections in India and Japan.

Brent crude was 69 cents, or 1%, higher at $69.57 a barrel at 1335 GMT. U.S. West Texas Intermediate (WTI) crude rose 61 cents, or 0.9%, to $66.30 a barrel.

Both contracts hit their highest levels since mid-March in intra-day trade on Wednesday.

"A return to $70 oil is edging closer to becoming reality," said Stephen Brennock of oil broker PVM.

"The jump in oil prices came amid expectations of strong demand as Western economies reopen. Indeed, anticipation of a pick-up in fuel and energy usage in the United States and Europe over the summer months is running high," he said.

Crude prices were also supported by a large fall in U.S. inventories.

The American Petroleum Institute (API) industry group reported that crude stockpiles fell by 7.7 million barrels in the week ended April 30, according to two market sources. That was more than triple the drawdown expected by analysts polled by Reuters. Gasoline stockpiles fell by 5.3 million barrels. [API/S]

Traders are awaiting data from the U.S. Energy Information Administration (EIA) due at 10:30 a.m. EDT (1430 GMT) on Wednesday to see if official data shows such a large fall.

"If confirmed by the EIA, that would mark the largest weekly fall in the official data since late January," Commonwealth Bank analyst Vivek Dhar said in a note.

The rise in oil prices to nearly two-month highs has been supported by COVID-19 vaccine rollouts in Europe and the United States where more than 40% of U.S. adults have received a vaccine.

Euro zone business activity accelerated last month as the bloc's dominant services industry shrugged off renewed lockdowns and returned to growth.

"The partial lifting of mobility restrictions, the expectation that tourism will return in the near future, and the lure of the psychologically important $70 mark are all likely to have contributed to the price rise," Commerzbank analyst Eugen Weinberg said.

This has offset a drop in fuel demand in India, the world's third-largest oil consumer, which is battling a surge in COVID-19 infections.

"However, if we were to eventually see a national lockdown imposed, this would likely hit sentiment," ING Economics analysts said of the situation in India.

Indian official data showed the coutry's oil imports in March rose from the previous month, buoyed by an upturn in economic activity but it could take a knock again because of renewed lockdowns in the world's third-largest crude importer.

(Reporting by Bozorgmehr Sharafedin in London, additional reporting by Sonali Paul in Melbourne and Koustav Samanta in Singapore; Editing by Richard Pullin, Jason Neely, Louise Heavens and David Clarke)