Oil prices rose on Wednesday after data showed a decline in US oil and fuel inventories, along with growing speculation of new production cuts for the "OPEC Plus" alliance following a warning by the Saudi energy minister to speculators, and the dollar rose to its highest level in two months against a basket of major currencies, as negotiations on raising the US debt ceiling protracted.

Brent crude futures rose 1.2 percent to $77.72 a barrel by 08:37 GMT, while U.S. West Texas Intermediate crude gained 1.3 percent to $73.89 a barrel.

Saudi Energy Minister Prince Abdulaziz bin Salman said he would keep speculators betting prices falling "in pain" and called on them to be "cautious".

Some investors saw this as a sign that the OPEC Plus alliance, which includes the Organization of the Petroleum Exporting Countries and allies including Russia, could discuss further production cuts at a meeting on June 4.

The rise in oil prices was driven by data showing a sharp drop in U.S. crude and fuel inventories. Market sources quoted the American Petroleum Institute as saying that crude inventories fell by about 6.8 million barrels in the week ended May 19, and gasoline inventories fell by about 6.4 million barrels.

If this is confirmed in data released by the U.S. Energy Information Administration on Wednesday, it would mean that U.S. gasoline inventories fell for the third week in a row to their lowest levels for this period of the year since 2014.

OPEC Plus alliance could consider further production cuts (Getty Images)

Dollar Stabilizes

The dollar rose on Wednesday to a two-month high as negotiations to raise the U.S. debt ceiling dragged on, and the dollar index, which measures the currency's performance against a basket of six major currencies, rose at 6.103 points, the highest level since March.

The crisis in Washington over debt ceiling hikes has helped the dollar rise, although it could result in a debt default and could push the country into recession as investors predict it could cause worse problems for the global economy.

Investors are largely reluctant to make riskier investments after a new round of talks between the White House and Republicans ended on Tuesday to raise the debt ceiling without any sign of progress.