Oil prices inch up as US crude supply drops

(Reuters)

Oil markets rose on Wednesday on a drop in U.S. crude inventories and a weaker dollar, while concerns about a potential shortfall in Iranian supply from November due to U.S. sanctions also buoyed prices.

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Brent crude oil futures were at $72.90 per barrel at 0653 GMT, up 27 cents, or 0.37 percent, from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 27 cents, or 0.41 percent, at $66.11 per barrel.

U.S. crude inventories fell by 5.2 million barrels in the week to Aug. 17 to 405.6 million barrels, ahead of analyst forecasts for a fall of 1.5 million barrels, according to data from industry group the American Petroleum Institute.

Official data from the U.S. Energy Information Administration (EIA) is due at 10:30 a.m. EDT (1430 GMT) on Wednesday.

"Investors are also confident that (official) inventories in the United States will decrease this week," ANZ Bank said in a note.

Signs of slowing U.S. crude output growth and a weaker U.S. dollar also provided some support to oil prices, said Kim Kwang-rae, commodity analyst at Samsung Futures in Seoul.

The U.S. dollar index against a basket of six major currencies eased on Wednesday to 95.211 after losing 0.7 percent the previous day, weighed down by U.S. President Trump's comments on monetary policy.

A weaker U.S. dollar makes oil, which is priced in dollars, less expensive for buyers in other currencies.

The EIA cut its 2018 U.S. crude production growth forecast on Aug. 7 to 10.68 million barrels per day (bpd) from 10.79 million bpd amid lower crude prices.

Concerns also remain over how much oil will be removed from global markets by renewed sanctions on Iran, despite worries that demand-growth could weaken amid a trade dispute between the United States and China, the world's two biggest economies.

"The Iran issue continues to occupy traders' minds," said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC) and OPEC's third-largest oil producer, said earlier this week no other OPEC member should be allowed to take over its share of oil exports.

Meanwhile, a Chinese trade delegation is in Washington to discuss the trade dispute with the U.S. side. But signs of a thaw were unlikely as U.S. President Donald Trump told Reuters in an interview on Monday that he did not expect much progress.

(Reporting by Jane Chung Editing by Richard Pullin and Joseph Radford)