(Reuters) -Oil prices extended gains on Wednesday after industry data showed a surprise drop in U.S. crude stocks last week, a positive sign for demand, though markets were also keeping a close eye on hostilities in the Middle East. Amidst the backdrop of a volatile market, oil prices climb as tensions escalate in the Middle East and US stocks face a decline.
Brent crude futures rose 26 cents, or 0.29%, to $88.68 a barrel and U.S. West Texas Intermediate crude futures climbed 26 cents, or 0.31%, to $83.62 a barrel at 0634 GMT.
U.S. crude inventories fell 3.237 million barrels in the week ended April 19, according to market sources citing American Petroleum Institute figures. In contrast, six analysts polled by Reuters had expected a rise of 800,000 barrels.
Traders will be watching for the official U.S. data on oil and product stockpiles due at 10:30 a.m. EDT (1430 GMT) for confirmation of the big drawdown.
Although U.S. business activity slowed in April, as indicated by the S&P Global flash Composite PMI Output Index. This index fell to 50.9 from 52.1 in March.
“This could help convince policy makers that rate cuts are required to support the economy,” ANZ analysts said in a note.
U.S. interest rate cuts could bolster economic growth and, in turn, demand for oil from the world’s top consumer of the fuel.
Despite ongoing conflicts in the Middle East, analysts maintain a bullish outlook, anticipating continued market support. However, the impact on oil supplies remains relatively constrained at present.
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