LONDON July 12 Reuters Oil crept higher on Wednesday in a market caught between expectations supply cuts by the world39;s biggest fuel exporters will drive prices higher and concerns global economic weakness will sap demand.

Brent futures gained 26 cents to 79.66 a barrel by 0855 GMT, and U.S. West Texas Intermediate WTI crude rose 28 cents to 75.11 a barrel.

Fundamentally, we should reach a supply deficit situation in the third quarter, but whether that is trumped by recession concerns and cautious sentiment around rate hikes remains to be seen, DBS Bank39;s lead energy analyst Suvro Sarkar said.

U.S. inflation data later on Wednesday will provide clues on the interest rate outlook in the world39;s biggest economy.

Markets expect one more rise, but that the U.S. ratehiking cycle is peaking. Higher rates can slow economic growth and reduce oil demand.

U.S. crude inventories rose about 3 million barrels in the week to July 7, market sources said, citing American Petroleum Institute industry figures. Analysts polled by Reuters expected a 500,000barrel rise in crude stocks.

Nevertheless, forecasts from the U.S. Energy Information Administration EIA and the International Energy Agency IEA point to the market tightening into 2024.

Meanwhile, The IEA expects the oil market should stay tight in the second half of 2023, citing strong demand from China and developing countries combined with supply cuts from leading producers. New forecasts from the IEA are expected this…