(Reuters) -Oil prices pared their gains on Wednesday but were still solidly bid, after U.S. inventories and fuel supplies tightened and as a warning from the Saudi energy minister to speculators raised the prospect of further OPEC+ output cuts.
Brent crude futures last rose 74 cents, or 1%, to $77.58 a barrel by 0645 GMT, while the U.S. West Texas Intermediate crude (WTI) gained 84 cents, or 1.2%, to $73.75 a barrel.
Brent had earlier rose as much as $1.03 to $77.87 a barrel. WTI had jumped as much as $1.07 to $73.98 a barrel.
"Oil is starting to turn bullish after the Saudi threat to short-sellers," said Edward Moya, senior analyst at OANDA, adding that Saudi Arabia will likely do "whatever it takes to defend prices".
Fears of a supply squeeze mounted after Saudi Arabia's energy minister said he would keep short sellers - those betting that prices will fall - "ouching" and told them to "watch out".
Some investors took that as a signal that the Organization of Petroleum Exporting Countries and allies including Russia, also known as OPEC+, could consider further output cuts at a meeting on June 4.
CMC Markets analyst Tina Teng said in a note on Wednesday that oil prices had jumped on speculation that OPEC+ may cut output further to keep price stability.
Also boosting oil prices was industry data late on Tuesday which showed that U.S. crude oil and fuel inventories fell sharply.
Crude inventories fell by about 6.8 million barrels in the week ended May 19, according to market sources citing American Petroleum Institute (API) figures. Gasoline inventories dropped by about 6.4 million, while distillate inventories declined by about 1.8 million. [API/S]
If data from the Energy Information Administration (EIA), due on Wednesday, confirm the API figures, U.S. gasoline inventories would have declined for the third consecutive week to their lowest pre-Memorial Day levels since 2014.
"If that is confirmed with tomorrow's EIA report, we could start to see some easing recessionary concerns," said OANDA's Moya.
The Memorial Day holiday in the United States, this year on May 29, traditionally marks the beginning of U.S. peak summer travel.
Elsewhere, markets were still wary about U.S. debt ceiling discussions which in turn tempered oil price gains. Another round of debt ceiling talks ended on Tuesday with no signs of progress as the deadline to raise the government's $31.4 trillion borrowing limit or risk default ticked closer.