Oil prices resume climb after U.S. stockpiles drop in tight market

While prices dipped on Tuesday as it appeared the European Union was unlikely to agree to a ban on Russian oil, the market remains on edge over the prospect of further sanctions on Russia.

Oil prices turned higher on Wednesday, erasing losses from the previous session, after industry data showed U.S. crude stocks fell last week, underlining how tight global supplies are amid the hit to Russian output from economic sanctions on Moscow.

(Representational image) (Reuters)

Brent crude futures climbed $1.06, or 0.9%, to $116.54 a barrel at 0213 GMT, after falling 14 cents in the previous session.

U.S. West Texas Intermediate (WTI) crude futures rose 87 cents, or 0.8%, to $110.14 a barrel, after losing 36 cents on Tuesday.

While prices dipped on Tuesday as it appeared the European Union was unlikely to agree to a ban on Russian oil, the market remains on edge over the prospect of further sanctions on Russia when U.S. President Joe Biden meets with European leaders on Thursday to discuss Russia's invasion of Ukraine, actions that Moscow calls a "special operation".

Supply remains tight. The latest data from the American Petroleum Institute industry group showed crude stocks fell by 4.3 million barrels for the week ended March 18, according to market sources, which defied analysts' forecasts for an increase.

Nine analysts polled by Reuters on average had estimated crude inventories rose by 100,000 barrels in the week to March 18.

"The U.S. and Saudi Arabia are the two nations that can meaningfully offset the loss of Russia's oil.Extra supply from either seems unlikely right now but we are in a highly unusual situation and that makes everything more fluid," Commonwealth Bank analysts said in a note.

Official U.S. inventory data is due from the Energy Information Administration on Wednesday.