Oil steadied near a two-month high on signs of a big drawdown in U.S. crude stockpiles.

Brent crude edged up, holding above US$86 a barrel, after slipping 0.4 per cent on Tuesday. The American Petroleum Institute reported crude inventories shrank 9.2 million barrels last week, according to people familiar with the data. If confirmed in official figures later Wednesday, that would be the largest drop in barrel terms since January.

Crude remains solidly higher this year, with futures helped by a wider risk-on mood in equity markets as the U.S. benchmark S&P 500 hits record after record. Anxieties over a potentially active hurricane season have also been supportive.

Geopolitical risks are also salient, with investors monitoring elections in France and the U.K., as well as Iran. In the Middle East, escalations in the war between Israel and Hezbollah threaten to spill over into an all-out war, while the Israel Defense Forces warned Palestinians to leave parts of Gaza’s Khan Younis ahead of a possible new assault.

“The API was positive on crude but negative on gasoline, so if confirmed by the EIA there will still be some concerns on weak U.S. gasoline demand,” said Giovanni Staunovo, a commodity analyst at UBS Group AG. “Some help is also coming from the Powell speech lifting equity markets.”

Prices:

• Brent for September settlement rose 0.1% to $86.34 a barrel at 10:21 a.m. in London
• WTI for August delivery nudged up to $82.88 a barrel