Oil Prices Rebound Over $2 as U.S. Inventory Data Points to Tighter Supply

Oil prices rose by more than $2 a barrel in early Wednesday trading, recovering a significant portion of the previous session's losses as preliminary data signaled a sharp decline in U.S. crude stockpiles.

International benchmark Brent futures climbed $2.71, or 3.2%, to $86.80 a barrel, while U.S. West Texas Intermediate (WTI) crude advanced $2.26, or 3.4%, to $81.95 a barrel as of 0002 GMT, according to Reuters.

U.S. Supply Drawdown

The primary driver for the rally was a report from the American Petroleum Institute (API), which indicated a substantial tightening of U.S. supply. According to market sources citing the API data, U.S. crude inventories fell by approximately 3.3 million barrels for the week ending July 24.

In contrast, the API report showed builds in refined products:

• Gasoline inventories grew by 918,000 barrels.
• Distillate inventories increased by 355,000 barrels.

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Investors are now awaiting official inventory data from the U.S. Energy Information Administration (EIA), due later on Wednesday, to confirm the trend.

Geopolitical Volatility and OPEC+ Outlook

This rebound follows a volatile period for crude markets. Prices had plunged by about 5% on Tuesday to a two-week low amid hopes for de-escalation in the U.S.-Iran conflict following a temporary pause in hostilities.

Global oil flows have been disrupted by the conflict, particularly through the critical Strait of Hormuz. While U.S. President Donald Trump told Fox News there were "good talks" with Iran, he also threatened further military action if negotiations fail. Iran has reportedly denied it is seeking to resume talks.

Adding another layer of support for prices, sources told Reuters that the OPEC+ producer group will likely halt its planned oil output increases for three months beginning in October. This move would follow the scheduled return of barrels that were previously withheld under voluntary cuts.