By Arathy Somasekhar

HOUSTON (Reuters) -Oil edged slightly higher on Wednesday as worries of tight supply after an unexpected draw in U.S. oil stocks and a halt to some Iraqi Kurdistan oil exports were partially offset by a smaller-than-expected output cut in Russia.

Brent crude was up 27 cents, or 0.3%, to $78.91 a barrel at 11:35 a.m. ET (1530 GMT), while West Texas Intermediate U.S. crude rose 48 cents, or 0.7%, to $73.67.

U.S. crude oil stockpiles fell unexpectedly last week, the Energy Information Administration said on Wednesday, as refineries ramped up operations after maintenance season and U.S. imports fell. [EIA/S]

Meanwhile, a larger-than-expected draw in gasoline stocks implied strong demand heading into the summer season.

The inventory data come as markets worry about supply tightness after exports of 450,000 barrels per day (bpd) of crude from Iraq’s semi-autonomous northern Kurdistan region were halted on Saturday following an arbitration decision.

On Wednesday, Norwegian oil firm DNO said it had begun shutting down production at its fields in Kurdistan. The company’s Tawke and Peshkabir fields averaged output of 107,000 bpd in 2022, a quarter of total Kurdish exports.

“The market has had a bit of a turnabout – we are getting an easing from the banking scare and as reports shows stronger demand, which is really bringing the hedge funds back into the market,” said Dennis Kissler, senior vice president of trading at BOK Financial.

Weeks of volatility had sent oil to a 15-month low on March 20, with investor nerves soothed this week by the sale of assets in collapsed lender Silicon Valley Bank.

However, gains were held back by news that Russian oil production fell by around 300,000 barrels per day (bpd) in the first three weeks of March, lower than the targeted cuts of 500,000 bpd.

(Additional reporting by Yuka Obayashi in Tokyo and Trixie Yap in Singapore; Editing by Robert Birsel, David Holmes, Sharon Singleton and Alexander Smith)