Oil up 2% on tighter U.S. supplies but tariff concerns loom

Oil prices rose 2% on Wednesday, as U.S. government data showed tighter oil and fuel inventories than expected, though investors kept an eye on mounting fears of a U.S. economic slowdown and the impact of tariffs on global economic growth.

Brent futures rose $1.33, or 1.9%, to $70.89 a barrel at 10:55 a.m. EDT (1455 GMT), while U.S. West Texas Intermediate crude futures gained $1.45, or 2.2%, to $67.70 a barrel.

U.S. crude stockpiles rose by 1.4 million barrels in the latest week, less than an expected 2-million barrel rise, U.S. government data showed on Wednesday.

U.S. gasoline inventories fell by 5.7 million barrels, versus expectations for a 1.9 million-barrel draw, while distillate stocks also dropped by more than expected.

"This week, the oil build was smaller than expected and gasoline and diesel draws were larger than expected," said Josh Young, Chief Investment Officer, Bison Interests. "This evidences stronger demand and could see oil prices rise as a result."

In recent days, crude futures have been supported by a weaker U.S. dollar and the Energy Information Administration (EIA) moving away from earlier calls of strongly oversupplied oil markets this year, said UBS analyst Giovanni Staunovo.

The dollar struggled to lift off a five-month low against other major currencies on Wednesday, as traders digested tit-for-tat U.S.-EU tariffs and a potential Russia-Ukraine ceasefire.

The dollar index which fell 0.5% to fresh 2025 lows on Tuesday, boosted oil prices by making crude less expensive for buyers holding other currencies. 

However, signs of cooling inflation offered investors some respite after U.S. consumer prices increased less than expected in February.