The American Petroleum Institute reported U.S. crude stocks fell
last week by 5.2 million barrels, more than three times the drop
analysts expected. The government's official figures are due at
1430 GMT.
"The API inventory data published after the close of trading
yesterday are lending buoyancy to prices," Commerzbank analyst
Carsten Fritsch said.
"Thus the official inventory data this afternoon are also likely
to show a more marked inventory reduction."
Brent crude <LCOc1>, the international benchmark, rose $1.52 to
$74.15 a barrel by 1141 GMT and reached $74.19, the highest
since Aug. 8. U.S. crude <CLc1> gained $1.38 to $67.22.
Oil also found support from a weak dollar, which has slipped
this week in response to U.S. President Donald Trump's comment
that he was "not thrilled" by the Federal Reserve's interest
rate increases.
A weaker dollar makes oil less expensive for buyers using other
currencies.
The prospect of a drop in oil exports from Iran, the
third-largest producer in the Organization of the Petroleum
Exporting Countries, in response to new U.S. sanctions is also
supporting the market.
European oil companies have started to cut back on Iranian
purchases, although Chinese buyers are shifting their cargoes to
Iranian-owned vessels to keep supplies flowing.
"The Iran issue continues to occupy traders' minds," said Greg
McKenna, chief market strategist at futures brokerage AxiTrader.
OPEC has started to boost supplies following a deal with Russia
and other allies in June, although producers have been cautious
so far. Saudi Arabia told OPEC it cut supply in July, rather
than increasing output as expected.
Signs of tighter supply countered concern about slowing oil
demand stemming partly from the trade dispute between the United
States and China, the world's two largest economies.
U.S. and Chinese officials were set to resume talks on
Wednesday, but Trump has predicted there will be no real
progress.
(Additional reporting by Jane Chung; Editing by Dale Hudson and
Louise Heavens)
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