NEW YORK: Oil futures rose 3 percent Wednesday, rallying in tandem with share prices on Wall Street and in reaction to a weaker dollar, ahead of US government data likely to show a smaller build in crude inventories in the latest week.

The International Energy Agency’s remarks downplaying expectations for a deluge of Iranian oil also soothed concerns that a supply glut was worsening from Tehran’s efforts to ramp up its crude exports to pre-sanction levels.

Brent crude futures were up $1.21, or 3 percent, at $40.35 a barrel by 9:37 a.m. EDT (1337 GMT).

US crude futures rose $1.30, or 3.4 percent, to $39.58 a barrel.

Both benchmarks had fallen about 3 percent on Tuesday on concerns about concerns about swelling global oil supplies, including new output from Kuwait and Saudi Arabia.

In Wednesday’s session, share prices on Wall Street, a proxy for confidence in oil, hit 3-month highs. The dollar fell to a near two-week low, making oil and other commodities denominated in the greenback more attractive to users of the euro and other currencies.

“This year’s unusually strong correlation between the stock market and energy futures has been largely inspired by the common support of low to negative rates,” said Jim Ritterbusch of Chicago-based energy markets consultancy Ritterbusch & Associates.

The American Petroleum Institute, an industry group, on Tuesday said US crude stocks likely rose last week by 2.6 million barrels to 534.4 million barrels, which would be a new record high for a seventh straight week.

Analysts polled by Reuters expect a 3.3 million barrel build.

The head of the International Energy Agency, meanwhile, said Iran is expected to add half a million barrels of oil supply a day within a year from its existing oilfields after the lifting of sanctions against Tehran in January, but developing new fields would take time,

Iran would need to prove that the investment conditions were profitable to the international investors and also that there was predictability in the markets, said Fatih Birol IEA’s executive director.

Birol’s estimate of Iran’s supply increase from existing oilfields was in line with previous market estimates.

And increases in Iranian gas supplies would come after oil, he said.

“It was misleading to believe that there would be a huge amount of new Iranian crude and natural gas production entering market in the short term,” Birol said on the sidelines of an event in Beijing to mark the 20th anniversary of cooperation between China and IEA. “It would take some time in terms of developing new oil fields, finding transmission routes and having the necessary market conditions.”

Iranian oil officials were hoping for a quick rebound in oil sales to European clients, which accounted for over a third of Iran’s exports, or 800,000 barrels per day, before the European Union imposed sanctions in 2012 over Tehran’s nuclear program.

The IEA chief said that may take some time too given ample supply in the market and lack of growth prospects in Europe.