LONDON: Oil rose to $110 a barrel on Wednesday, supported by an industry report showing U.S. crude inventories had unexpectedly fallen last week and by persistent disruption to Libya's output amid renewed fighting.
The American Petroleum Institute said on Tuesday that crude stocks fell 10.3 million barrels, compared with an analyst forecast for an 800,000 barrel increase. Traders will be watching to see whether official government data due on Wednesday confirms the drop.
"There are various issues - the API's surprising crude stock draw, and Libya is also an important one," said Tony Machacek, a broker at Jefferies Bache.
"But the crude stock draw looks like a slightly excessive number, and I doubt it will have much impact on the market for long."
Brent crude gained 38 cents to $110.07 a barrel at 0849 GMT, after it settled 32 cents higher. U.S. crude rose 82 cents at $103.15, after it settled 22 cents up in the previous session.
The U.S. government's Energy Information Administration will release its weekly supply report at 1430 GMT.
Libya also provided support for oil prices and Brent in particular. Explosions and fighting were heard near two military camps in Tripoli on Wednesday, witnesses said, two days after gunmen had stormed parliament in the worst violence in months.
"Developments in Libya and Ukraine are still keeping an elevated risk premium in Brent, with some jittery trading ahead," said Andrey Kryuchenkov, an analyst at VTB Capital.
National output in Libya was 230,000 barrels per day (bpd), up from 210,000 bpd on Monday but still a fraction of Libya's potential. Two large oilfields were still shut more than a week after the government said protests there were over.
Libya, an OPEC member, produced close to 1.6 million bpd before the 2011 war, which toppled Muammar Gaddafi.
The conflict in Ukraine also supported prices. A senior Russian official said the presidential election in Ukraine on May 25 could deepen political divisions, casting doubts on whether Moscow will consider the vote legitimate.
The West has imposed sanctions against Russia, one of the world's biggest oil producers, over its involvement in the conflict in Ukraine. A dispute between Moscow and Kiev over gas prices could impact shipments of Russian natural gas to Europe.
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