LONDON: Brent crude rose above $109 a barrel on Wednesday following a sharper-than-expected drop in U.S. oil inventories and as the euro zone eyed policies that may spur growth and boost the region's energy demand.
The European Central Bank will meet on Thursday to discuss measures aimed at stimulating the economy after inflation in the region dropped to record lows in May.
Brent oil for July delivery was up 50 cents at $109.32 a barrel by 1037 GMT, after settling down 1 cent the previous day. U.S. crude, or West Texas Intermediate (WTI), for July delivery gained 70 cents to $103.36 a barrel.
Traders were waiting for government data on U.S. oil inventories due at 1430 GMT after industry statistics showed a bigger-than-expected fall in crude stockpiles.
Crude inventories fell 1.4 million barrels in the week ended May 30 to 382.5 million barrels, data from the American Petroleum Institute (API) showed, compared with analyst expectations for a decrease of 300,000 barrels.
Crude stocks at the Cushing, Oklahoma, WTI delivery hub fell 300,000 barrels, the API said, but analysts said there may need to be a bigger decline reported by the U.S. Energy Information Administration (EIA) to spur further price gains.
"The inventory reduction would have to be more marked than that reported by the API to drive oil prices up any further, for the global oil market is amply supplied at present," Commerzbank analyst Carsten Fritsch said.
Oil prices have stabilised this week after slipping 1-1.5 percent in the last week of May as traders booked profits on an expected rise in OPEC supply to the highest in three months in May.
LIBYA AND UKRAINE
Simmering tensions between Russia and Western powers over Ukraine and the political turmoil in Libya that has curbed the OPEC member's crude output have been underpinning oil prices.
U.S. President Barack Obama unveiled plans to spend up to $1 billion to beef up military support for eastern European members of the NATO alliance while fighting raged in eastern Ukraine for a second day.
In Libya, the eastern Hariga oil port remained closed on Tuesday as protesting security guards have not been paid, state oil firm AGOCO said.
"There are a lot of impediments to any return to full production in Libya," said Michael McCarthy, chief strategist at CMC Markets in Sydney.
"It's not just the disruption to operations, but also issues around control of ports. These problems are a part of a larger political issue in Libya and a resolution appears to be a long way away," he said.
Traders are also watching the results of wage talks between oil companies and the largest union in Norway, after a fourth round of negotiations failed. Two years ago about 10 percent of Norway's offshore workers went on strike for 16 days, cutting oil output by 13 percent and gas by 4 percent.
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