By Sonali Paul

MELBOURNE (Reuters) – Oil prices climbed on Wednesday, erasing losses from the previous session, on hopes of progress in peace talks between Russia and Ukraine and providing a fresh reminder supply remains tight as data showed stocks fell sharply last week.

futures touched a high of $112.78 shortly after opening and were up $1.35, or 1.2%, at $111.58 at 0005 GMT, reversing a 2% loss in the previous session.

U.S. West Texas Intermediate (WTI) crude futures jumped $1.29, or 1.2%, to $105.53 a barre, erasing a 1.6% drop on Tuesday.

The focus turned to supply tightness after the American Petroleum Institute industry group reported crude stocks fell by 3 million barrels in the week ended March 25, according to market sources. [API/S]

That was triple the decline that 10 analysts polled by Reuters had expected on average.

The market had dropped about 2% in the previous session after Russia promised to scale down military operations around Kyiv and another city, more than a month after the invasion of Ukraine that Moscow calls a “special operation” to disarm its neighbour.

However, reports of attacks continued, and although Ukrainian President Volodymyr Zelenskiy said there were promising signs from peace talks held in Istanbul on Tuesday, he was looking for concrete results.

“We can say the signals we are receiving from the talks are positive but they do not drown out the explosions of Russian shells,” Zelenskiy said in a late-night address.

Commonwealth Bank analyst Tobin Gorey said in a note that “The (price) recovery suggests the oil market, at least, has a strong degree of scepticism about any ‘progress’.”

Keeping the market tight, major oil producers are unlikely to boost output above their agreed 400,000 barrels per day when the Organization of the Petroleum Exporting Countries and allies including Russia, together called OPEC+, meet on Thursday, several sources close to the group said.

Saudi Arabia and the United Arab Emirates, key members of OPEC+, said the group would not look to take action against Russia for its invasion of Ukraine, saying the producers’ group was only to stabilise the market and not to engage in politics.