New Delhi

Oil prices inched higher, extending their biggest daily gain in a month, as US crude stockpiles continue to decline.

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Brent crude jumped above $85 a barrel, rising 1.6 per cent Wednesday, while West Texas Intermediate traded just shy of $83. According to data from the Energy Information Administration, crude inventories in the US fell by 4.87 million barrels last week. It's the third straight week of declines and the lowest since February. While inventories typically decline this time of year, current levels are below the five-year seasonal average.

Although supply cuts from OPEC+ have underpinned oil prices this year, increased production from non-cartel countries has offset these cuts. Meanwhile, expectations of looser monetary policy from the US have supported crude by boosting the appeal of risk assets and putting downward pressure on the US dollar. A weaker dollar makes dollar-denominated commodities more appealing to international buyers.

Timespreads, meanwhile, have strengthened, indicating strong near-term demand. The prompt spread, or the gap between Brent's two nearest contracts, is more than $1 a barrel in backwardation — when the nearest contract trades above the next, compared with 80 cents a month ago.

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Futures are “breaking away from a losing streak as a substantial correction in the US dollar supports oil prices,” said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova Pte. Also, a steeper-than-anticipated drop in US stockpiles signalled that consumption remains strong and could counter concerns about China's economic growth, she said.

Further out, oil prices continued steady strides despite concerns over global economic conditions, as the relentless fall of US crude stockpiles and the expected looser monetary policy actions have kept prices sturdy. On the same note, timespreads indicate that near-term demand remains firm and points to a positive short-term outlook for the oil market.