Brent crude rises as U.S. inventories drop, supply outlook uncertain

SINGAPORE (Reuters) – Brent crude oil edged up on Wednesday after a second successive drop in US crude oil inventories driven by the United States.

Brent crude futures LCOc1 were up 7 cents at $ 77.83 a barrel by 0915 GMT, while US crude futures CLc1 were down 17 cents at $ 73.97 a barrel.

U.S. Crude Oil Inventories by Barrie to 4.5 million Barrels in the week to June 29, the American Petroleum Institute (API) said on Tuesday. Gasoline and distillate stocks, also fell, the API said.

Syncrude Canada's 360,000 barrels per day oil sands facility near Fort McMurray, Alberta. The outage is expected to last through July.

Looming U.S. sanctions on Iranian crude exports, force majeure in Libya and unplanned pipeline outages in Nigeria are meeting rising output by the Organization of the Petroleum Exporting Countries and clouding the supply outlook.

"In an ideal world an increase in global or regional oil production would have fallen. These are, however, no normal times, and they are almost weekly occurrences. Under the circumstances, it is stated that PVM Oil Associates strategist Tamas Varga said.

Trading activity is expected to be limited on Wednesday by the U.S. Independence Day holiday but volatility however is creeping higher.

Implied options volatility, a way of measuring the price of crude oil and its investors is at its highest since the last OPEC meeting.

Harry Tchilinguirian, Head of Commodities Strategy at BNP Paribas, said that they would like to move on, instead of protecting themselves.

"When there is consolidation in the market, there is also the expectation of an eventual price breakout in either direction. So in the market options, the volatility gets bid up, "Tchilinguirian told the Reuters Global Oil Forum.

Investors can bet on various aspects of an option, from the premium, or price, to the delta, or how much the price of that option might move.