By Georgina McCartney

HOUSTON (Reuters) -Oil prices edged up slightly on Wednesday, with gains from a potential extension of OPEC+ supply cuts offset by stocks rising more than expected.

futures rose 13 cents to reach $83.78 a barrel by 12:26 p.m. EST (1726 GMT). U.S. West Texas Intermediate futures (WTI) rose by 2 cents to hit $78.89. Both benchmarks had fallen $1 in earlier trading.

U.S. crude inventories rose by 4.2 million barrels last week, the Energy Information Administration (EIA) said, surpassing analysts’ expectations of a 2.74 million-barrel build.

Stockpiles have risen for five consecutive weeks due to unplanned refinery outages following a winter storm in January, along with planned plant turnarounds.

U.S. refinery utilization rates edged up 0.9 percentage point last week to 81.5% of total capacity, however, they were below the 10-year seasonal average. Refineries have operated below 83% utilization rates for the past month, their longest streak in nearly three years.

“Refiners are still side-lined to a great degree, and not making a real effort to rapidly come out of the shutdowns experienced in the aftermath of the cold snap,” John Kilduff, partner at New York-based Again Capital said.

An ongoing outage at BP (NYSE:)’s 435,000-barrel-per-day Whiting refinery in Indiana, the largest plant in the Midwest, has also reduced fuel stock levels, Kilduff said.

Gasoline stocks, in turn, have drawn down for a fourth straight week to a two-month low at 244.2 million barrels and about 2% below the five-year average for this time of year, the EIA said.

“If this trend continues for the next six to eight weeks, we could see gasoline inventories tighten up as we go into the driving season,” said Andrew Lipow, president of Lipow Oil Associates in Houston.

Brent and WTI futures rose more than $1 a barrel on Tuesday after Reuters reported that the Organization of the Petroleum Exporting Countries and allies led by Russia (OPEC+) will consider extending voluntary oil output cuts into the second quarter. 

However, signs that interest rates in the world’s largest economy would remain elevated, kept prices from rising higher.​

Federal Reserve Governor Michelle Bowman had signaled on Tuesday that she was in no rush to cut U.S. interest rates, particularly given continuing inflation risks. Higher-for-longer rates could dampen economic growth and suppress demand for oil.

The oil market was looking for clearer direction from Thursday’s January U.S. personal consumption expenditures (PCE) price index, the Fed’s preferred measure of inflation and a key factor in rate decisions.

“In case tomorrow’s U.S. PCE reading comes in above expectations, a temporary top might have been found for oil”, Tamas Varga of oil broker PVM said in a note.

Interest rates are looking likely to stay higher for longer as the fed reigns in economic activity, Again Capital’s Kilduff said. “This will also give renewed strength to the U.S. dollar – another headwind for crude”, he added.