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Oil prices rose in early trade on Wednesday, adding to gains in the previous session, after industry data showed a surprise drop in U.S. crude stocks last week, a positive sign for demand, and attention shifted away from hostilities in the Middle East.

Brent crude futures rose 9 cents, or 0.1%, to $88.51 a barrel and U.S. West Texas Intermediate crude futures gained 10 cents, or 0.11%, to $83.45 a barrel at 0031 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 10:30 a.m. (1430 GMT) for confirmation of the big drawdown.

Meanwhile, expectations are growing that interest rates will be cut in the UK and EU in June, which could help support economic growth and, in turn, oil demand.

In the euro zone and the UK business activity this month was expanding at its fastest pace in nearly a year, suggesting that economic growth "continued to gather momentum", Capital Economics said in a note.

"While sticky services price pressures remain upside risks to inflation, we still expect central banks to start cutting rates in the next few months," the note said.

In the U.S., business activity cooled in April to a four-month low, with S&P 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.

"U.S. business activity in April was at its lowest pace this year," ANZ Research said in a note. "This could help convince policy makers that rate cuts are required to support the economy."

Traders have largely ignored the latest developments in the Middle East in early trade on Wednesday where, according to residents, Israeli strikes intensified across Gaza in some of the heaviest shelling in weeks.