Investing.com– Oil prices rose in Asian trade on Wednesday as industry data showed a drop in U.S. inventories and boosted expectations of tighter supplies, although anticipation of key inflation data kept gains limited.
Crude markets took some positive cues from Federal Reserve Chair Jerome Powell, who said that the world’s biggest economy remained resilient, while China’s outlining of plans for a massive 1 trillion yuan ($138 billion) bond issuance also factored into some strength.
Expectations of tighter North American markets were also furthered by a swathe of devastating wildfires in Canada. Fort McMurray- a major Canadian oil sands city- saw about 6000 people evacuated due to an approaching fire.
Still, gains in crude were limited by hotter-than-expected U.S. inflation data on Tuesday. The reading saw markets turn fearful of a stronger-than-expected inflation reading on Wednesday.
expiring in July rose 0.4% to $82.70 a barrel, while rose 0.4% to $77.97 a barrel by 21:06 ET (01:06 GMT).
US inventories shrink more than expected- API
Data from the (API) showed on Tuesday that U.S. oil inventories shrank 3.1 million barrels in the week to May 10, more than expectations for a draw of 1.1 million barrels.
The data also showed a decline in gasoline stockpiles, while distillates rose by 349,000 barrels.
The reading spurred some hopes that U.S. fuel demand was picking up with the advent of the travel-heavy summer season- a trend that could help tighten global crude supplies, even as U.S. production remains at record highs.
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Shrinking U.S. inventories and potential supply disruptions in Canada also present a tighter outlook for North American crude markets.
The API data usually heralds a similar reading from official , which is due later on Wednesday.
Inflation jitters in play as CPI data looms
Oil markets remained on edge ahead of key U.S. CPI data due later on Wednesday, especially as PPI data for April read hotter-than-expected.
Traders were wary of any more signs of sticky U.S. inflation, which are likely to push the Fed into keeping interest rates high for longer- a scenario that bodes poorly for crude.
High rates are expected to stall global economic activity and potentially dent demand for oil.