April 24 Reuters Oil prices extended gains on Wednesday after industry data showed a surprise drop in U.S. crude stocks last week, a positive sign for demand, though markets were also keeping a close eye on hostilities in the Middle East.

Brent crude futures rose 26 cents, or 0.29, to 88.68 a barrel and U.S. West Texas Intermediate crude futures climbed 26 cents, or 0.31, to 83.62 a barrel at 0634 GMT.

U.S. crude inventories fell 3.237 million barrels in the week ended April 19, according to market sources citing American Petroleum Institute figures. In contrast, six analysts polled by Reuters had expected a rise of 800,000 barrels.

Traders will be watching for the official U.S. data on oil and product stockpiles due at 1030 a.m. EDT 1430 GMT for confirmation of the big drawdown.

U.S. business activity cooled in April to a fourmonth low, with SP Global saying on Tuesday that its flash Composite PMI Output Index, which tracks the manufacturing and services sectors, fell to 50.9 this month from 52.1 in March.

This could help convince policy makers that rate cuts are required to support the economy, ANZ analysts said in a note.

U.S. interest rate cuts could bolster economic growth and, in turn, demand for oil from the world39;s top consumer of the fuel.

Analysts were still bullish that any latest developments in conflicts in the Middle East will still support markets, though the impact on oil supplies remains limited for now.

Overall, crude oil prices are well…