09:00 AM EDT, 10/29/2025 (MT Newswires) -- Oil prices edged higher early on Wednesday after a report showed a larger than expected drop in U.S. oil inventories, showing demand remains solid despite concerns the market is over supplied.

West Texas Intermediate crude oil for December delivery was last seen up US$0.12 to US$60.27 per barrel, while December Brent oil was up US$0.18 to US$64.58.

In its weekly survey, the American Petroleum Institute on Tuesday said U.S. oil inventories fell by four-million barrels last week, well more than the consensus forecast for a drop of 2.9-million barrels, according to Investing.com, while gasoline and distillate inventories also dropped. The Energy Information Administration will release official storage data later on Wednesday morning.

The drop comes amid warnings the market is over supplied on rising production from OPEC+ and its competitors in North and South America. Concerns over rising inventories has pushed prices down by 5.2% over the past month despite tightening international sanctions on Russia's oil exports and prospects for recovering U.S. growth as the Federal Reserve is expected to cut interest rates by 25 basis points this afternoon.

"Crude oil futures traded steady after a three-day decline, as traders concluded that last week's sanctions-driven surge was largely short covering rather than a shift in fundamentals. Ample supply remains a key focus and may continue to weigh on prices in the short term," Saxo Bank noted.

Hopes for a ceasefire in the trade battle between the world's two largest economies are also offering some support to the commodity, as U.S. President Donald Trump is set to meet Xi Jinping, his Chinese counterpart, at the APEC summit in South Korea on Thursday. The Wall Street Journal reported the Trump Administration will agree to cut its levies on imports from China to 35% from 45% in return for China cracking down on exports of the chemicals used to make fentanyl.