Oil prices rise as crude draw outweighs coronavirus demand concerns

Oil prices ticked up on Wednesday as a massive drawdown in U.S. crude inventories countered persistent concerns about the coronavirus pandemic weakening fuel demand.

U.S. crude oil stocks dropped 9.9 million barrels last week to their lowest since March at 476.7 million barrels, the Energy Information Administration said, compared with analysts’ expectations in a Reuters poll for a 430,000-barrel rise. [EIA/S]

Brent crude gained 38 cents, or 0.7%, to $56.29 a barrel by 11:14 a.m. EST (1614 GMT). U.S. West Texas Intermediate (WTI) crude rose 48 cents to $53.09.

“The market was led up by a significant draw in crude oil as the refining industry continues to turn the crude oil surplus into refined products,” said Andrew Lipow, president Lipow Oil Associates in Houston.

U.S. gasoline stocks jumped 2.5 million barrels to 247.7 million barrels, the EIA said, more than forecasts for a 1.8 million-barrel build.

Oil prices have recovered from record lows in April due to a demand recovery, particularly in China, and huge supply cuts by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+.

“Oil continues consolidating,” said Jeffrey Halley of brokerage OANDA. “The Saudi Arabian cuts, OPEC+ compliance above 85% and an insatiable demand from Asia means that oil has seen its cyclical lows for 2021.”

Still, the number of global coronavirus cases has surpassed 100 million as infections rise in Europe and the Americas, and Asia scrambles to contain fresh outbreaks, limiting oil prices.

China, the second-largest oil consumer, has recently seen a coronavirus resurgence, but official Chinese data showed 75 new confirmed cases of COVID-19 on Wednesday, the lowest daily rise since Jan. 11.

After the U.S. oil inventory report, the market’s focus shifts to the results of the U.S. Federal Reserve’s two-day policy meeting later on Wednesday. Analysts expect the Fed to stick to its dovish tone to help speed the economic recovery.