MELBOURNE Reuters -- Oil prices went up on Wednesday after a weaker dollar fell on signs of slowing inflation in the United States, easing fears that the world's largest oil user may face a recession because of further interest rate hikes.
The price of crude futures increased by 20 cents, or 0.2%, to $85.66 a barrel at 0128 GMT, while the U.S. West Texas Intermediate WTI crude futures rose 34 cents, or 0.4%, to $79.21 a barrel, extending gains of about 1% in the previous session.
Sentiment shifted amid a positive company reporting season. ANZ commodities analyst said in a note that signs of cooling inflation also raised expectations that the Fed will be able to pause rate hikes.
The dollar index fell as a weaker dollar makes the commodity cheaper for buyers holding other currencies, as a result of the rate hike expectations.
The Organization of the Petroleum Exporting Countries and allies, including Russia, will hold a meeting on Wednesday, where producers will be expected to support their current output targets agreed in November.
In January, OPEC oil output fell as Iraqi exports dropped and Nigeria's output did not recover, with the 10 OPEC members pumping 920,000 barrels per day bpd below the group's target volumes under the OPEC agreement, according to a survey by Reuters.
The shortfall was bigger than the deficit of 780,000 barrels per day in December.
The American Petroleum Institute industry group showed crude stocks rose by 6.3 million barrels in the week ending Jan. 27, according to market sources.
That was a bigger build than the 400,000 barrels analysts polled by Reuters had predicted on average.
Distillate stocks, which include diesel and heating oil, went up by 1.5 million barrels, contrary to analysts' expectations of a 1.3 million barrel drop.