Oil rises over 1% as further crude drawdown seen

© Reuters. FILE PHOTO: A sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, U.S. November 22, 2019. REUTERS/Angus Mordant

By Stephanie Kelly

NEW YORK (Reuters) -Oil prices rose more than 1% on Tuesday, as tight supply and expectations of a further draw in U.S. and global crude inventories provided support.

Brent crude rose $1.18, or 1.6%, to $76.34 a barrel, while U.S. West Texas Intermediate crude rose $1.11, or 1.5%, to $75.21 a barrel.

U.S. crude inventories were expected to have dropped 4.4 million barrels last week, while gasoline stocks were seen 1.8 million barrels lower, according to analysts polled by Reuters ahead of industry and government weekly reports, respectively at 4:30 p.m. EDT and on Wednesday. [EIA/S] [API/S]

U.S. crude inventories have declined for seven consecutive weeks to their lowest since February 2020 while gasoline demand reached its highest since 2019, signaling increasing strength in the economy.

The International Energy Agency said the global tapping of oil in storage during the third quarter was set to be the biggest in at least a decade and that early June data from the United States, Europe and Japan showed a large stock draw.

Weighing on oil futures earlier in the session, U.S. consumer prices increased by the most in 13 years in June.

"The high inflation number is increasing the odds that the Federal Reserve is going to have to be more aggressive when it comes to stimulus. That is probably a negative (for oil)," said Phil Flynn, senior analyst at Price Futures Group in Chicago.

The U.S. dollar jumped against a basket of currencies on Tuesday after the data. A stronger U.S. dollar makes oil more expensive in other currencies.

Reports from around the world of surging infections also kept some investors cautious.

The World Health Organization warned the Delta COVID-19 variant was becoming dominant and many countries had yet to receive enough doses of vaccine to secure their health workers.

Meanwhile, OPEC+ is yet to make progress closing divisions between Saudi Arabia and the United Arab Emirates that last week prevented a deal to raise oil output, making another policy meeting this week less likely, OPEC+ sources said.