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The
American Petroleum Institute (API) on Tuesday reported U.S.
crude oil stocks rose by 914,000 barrels, market sources said.
Still, analysts expect them to decline by nearly 3 million
barrels in official inventory data due on Wednesday.
Brent crude oil futures were up 47 cents, or 0.6%, to $85.48 a
barrel by 1136 GMT. U.S. West Texas Intermediate crude futures
gained 54 cents, or 0.7%, to $81.37.
"The ubiquitous view is that demand will increase during the
summer," said Tamas Varga of oil broker PVM. "Geopolitics is
still seen as a supportive element of the equation."
However, a stronger dollar capped gains, as the market remained
optimistic of a rate cut before the end of the year.
The dollar was up 0.34%, highlighting currency strength that
makes dollar-priced oil more expensive for buyers holding other
currencies.
Official U.S. inventory data from the Energy Information
Administration is out at 1430 GMT.
"It seems the market is shrugging off demand concerns for now,
anticipating inventory drawdowns in peak third quarter demand
season," said Suvro Sarkar, energy sector team lead at DBS Bank.
Strength in front-month prices is also indicating strong
physical demand for oil, a boon for prices in the near-term,
analysts say. August Brent and WTI prices were around 80 cents a
barrel higher than September prices.
"Key oil market indicators are signalling that crude's rebound
is reflecting a stronger underlying physical market," JP Morgan
analysts wrote in a client note.
On the geopolitical front, Houthi attacks on shipping in the Red
Sea and mounting Israel-Hezbollah hostilities in Lebanon are
also bullish for oil prices, DBS' Sarkar said.
The Houthis have so far sunk two vessels and seized another, and
said on Tuesday they used a missile to hit a vessel in the
Arabian Sea.
(Reporting by Arunima Kumar in Bengaluru; Additional reporting
by Shariq Khan in New York, Emily Chow and Trixie Yap in
Singapore; editing by Louise Heavens and Jason Neely)
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