Oil rises more than $2 on the back of declining US inventories

Oil prices rose by more than $2 per barrel in early trading on Wednesday, driven by a decline in U.S. crude oil inventories, thereby offsetting part of the losses from the previous session that resulted from a halt in fighting between Washington and Tehran.

Brent crude futures rose $2.71, or 3.2 percent, to $86.80 per barrel by 00:02 GMT, while U.S. West Texas Intermediate crude rose $2.26, or 3.4 percent, to $81.95 per barrel.

Sources in the market said on Tuesday, citing data from the American Petroleum Institute, that U.S. crude oil inventories fell by approximately 3.3 million barrels in the week ending July 24.

At the same time, gasoline inventories rose by 918,000 barrels, while distillate product inventories increased by 355,000 barrels compared to the previous week, according to the sources.

Official inventory data from the U.S. Energy Information Administration is scheduled to be released later on Wednesday.

OPEC and its allies in the “OPEC+” alliance provided additional support to prices, with sources telling Reuters that the alliance is likely to halt oil production increases for three months starting in October, after completing the restoration of volumes previously cut under voluntary reductions.

Oil prices have been volatile due to the U.S.-Israeli war on Iran, which has disrupted global crude oil flows, particularly with the effective closure of the Strait of Hormuz.

Prices fell by about 5 percent on Tuesday to reach their lowest level in two weeks, amid hopes for a resumption of serious efforts to end the conflict between the United States and Iran following a temporary halt in hostilities.

U.S. President Donald Trump, who halted a two-week U.S. bombing campaign earlier in the week, told Fox News on Tuesday that there were “good talks” with Iran, but he threatened further strikes if negotiations collapsed. However, Iran denied seeking to resume talks with the United States.