TOKYO: Brent oil prices extended gains above $86 a barrel on Wednesday, supported by short-covering and drawdowns in US product stockpiles, as investors waited for news later in the day from a US Federal Reserve monetary policy meeting.
Data by industry group American Petroleum Institute (API) on Tuesday showed US crude inventories rose 3.2 million barrels last week, broadly in line with expectations, while gasoline and distillate stocks showed bigger-than-expected declines.
Investors were now waiting for data on stockpiles from the US government's Energy Information Administration at 1030 EDT (1430 GMT).
"Total stockpiles of crude and main oil products declined, prompting the gain in oil prices amid a sign of tightness," said Takayuki Nogami, senior economist at Japan Oil, Gas and Metals National Corp.
Brent crude for December delivery was up 46 cents at $86.49 a barrel by 0609 GMT, after settling up 20 cents on Tuesday.
NYMEX crude for December delivery was up 30 cents at $81.72 a barrel, after settling up 42 cents at $81.42 on Tuesday as the dollar fell and US equities rose.
"Ahead of the FOMC, next week's (US) midterm elections and OPEC, it is hard to make a move," said Masaki Suematsu, energy team manager at Newedge Japan.
"We're seeing some short-covering after a lengthy short period, and the fundamentals are not strong, so the upside is limited."
The Federal Open Market Committee (FOMC) winds up a two-day policy meeting on Wednesday and is widely expected to announce it will end its two-year-old bond-buying stimulus programme as the US economy continues to recover.
But Fed officials have also stressed they are in no hurry to tighten policy further by raising rates from near-zero levels.
"Today's focus is on the EIA and FOMC, but both are unlikely to prompt a move in oil prices of $1 or $2," Nogami said. "Any moves are likely to be within a $1 range."
The Fed was unlikely to make any clear statement on the timing of a rate rise, Nogami added.
OPEC Growing US shale oil supply and OPEC's apparent reluctance to cut its output have caused prices to fall around 23 percent since the end of June.
"Amid little sign of concerted efforts for production cuts by OPEC, the belief that slack supply/demand won't go away is deeply embedded in the market," Nogami said.
Oil prices had fallen about 1 percent in the two sessions before Tuesday's gains, reacting to a looming contango in US crude futures and Goldman Sachs' cut in its price forecasts due to higher projected supplies.
While most banks have cut their price forecasts for Brent and US crude next year, some analysts think the market may rebound quicker than projected.
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