Oil prices climb on prospects for tighter supply as demand rises

© Reuters. FILE PHOTO: Storage tanks are seen at the Petroineos Ineos petrol refinery in Lavera, France, March 29, 2022. REUTERS/Benoit Tessier

By Arathy Somasekhar

HOUSTON (Reuters) - Oil prices rose in early trade on Wednesday, boosted by tight supplies and the prospect of rising demand from the upcoming start of the U.S. summer driving season.

Brent crude futures for July rose 46 cents, or 0.4%, to $114.02 a barrel by 0020 GMT. U.S. West Texas Intermediate (WTI) crude futures for July delivery was up 58 cents, or 0.5%, to $110.35 a barrel.

Brent had gained 0.1% on Tuesday while WTI settled down 52 cents.

France's new foreign minister said on Tuesday she was optimistic that those still opposed to a new European Union sanctions package that would phase out Russian oil imports to the bloc could be convinced, and that the bloc would strike a deal that would have the effect of tightening global supply.

Meanwhile a Biden administration official headed to India on Tuesday to talk with officials and private industry executives about U.S. sanctions on Russia over its invasion of Ukraine, the Treasury Department said, as Washington seeks to keep India's purchases of Russian oil from rising. Moscow calls its actions in Ukraine "a special military operation".

Supply could tighten just as U.S. Memorial Day weekend travel is expected to be the busiest in two years, as more American drivers hit the road and shake off coronavirus pandemic restrictions despite high fuel prices.

While U.S. crude stocks rose by 567,000 barrels last week, according to market sources citing American Petroleum Institute figures, gasoline inventories fell by 4.2 million barrels. Distillate stocks also dropped by 949,000 barrels. [API/S]

Data from the U.S. government on stockpiles were expected on Wednesday. Analysts, in a Reuters poll, expected U.S. crude oil and gasoline inventories to fall last week, while distillate stockpiles were seen up. [EIA/S]

In China, Beijing stepped up quarantine efforts to end its month-old COVID outbreak, while in Shanghai, authorities plan to keep most restrictions in place this month, before a more complete lifting of the two-month-old lockdown from June 1.