Oil climbs 1% after U.S. crude stocks signal tighter supply
Storage tanks are seen at the Petroineos Ineos petrol refinery in Lavera, France, March 29, 2022. /Reuters

Storage tanks are seen at the Petroineos Ineos petrol refinery in Lavera, France, March 29, 2022. /Reuters

Oil prices rose at the start of Asian trade on Wednesday after industry data showed drawdowns in U.S. crude and fuel stockpiles, raising supply concerns.

Brent crude futures rose 89 cents, or 0.9 percent, to $105.86 a barrel by 2:23 a.m. GMT. West Texas Intermediate crude futures rose 97 cents, or 1 percent, to $103.38 a barrel.

The gains come on the back of news from Tuesday that the European Union is working on new sanctions against Russia for its operations in Ukraine that will target Moscow's oil industry.

European Commission President Ursula von der Leyen is expected to spell out the plans on Wednesday, officials said.

In the U.S., crude and fuel stocks fell last week, market sources said, citing American Petroleum Institute figures. Crude stocks fell by 3.5 million barrels for the week that ended April 29, the sources said, more than the Reuters poll's expectations of an 800,000-barrel drop.

"The API report had people stop worrying about the demand side and start worrying about the supply side again," said Phil Flynn, an analyst at Price Futures group.

The U.S. government data on stockpiles is due on Wednesday.

"The big picture is clearly negative for commodities demand," Caroline Bain, chief commodities economist at Capital Economics said in a note.

She added that rising inflation and higher interest rates are starting to bear down on spending.

"While supply constraints may keep commodity prices elevated for some time, we think subdued demand will weigh on most prices later this year and in 2023," Bain said.

On Thursday, the Organization of the Petroleum Exporting Countries and their allies are expected to stick to their policy for another monthly production increase, although the group, known as OPEC+, has undershot output targets between October and March, except for February.

(With input from Reuters)

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