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Oil prices rise after big drop in US crude stocks

Brent crude was up 44 cents, or 1%, at $44.87 a barrel by 0810 GMT, while West Texas Intermediate oil rose 43 cents, or 1%, to $42.13 a barrel.

Picture: 123rf.com

LONDON – Oil prices firmed on Wednesday after data showed a big drop in US crude inventories, although concerns mounting coronavirus infections will lead to reduced fuel demand capped gains.

Brent crude was up 44 cents, or 1%, at $44.87 a barrel by 0810 GMT, while West Texas Intermediate oil rose 43 cents, or 1%, to $42.13 a barrel.

US crude inventories fell 8.6 million barrels in the week to 1 August to 520 million barrels, compared with analysts’ expectations for a 3 million barrel drop, the American Petroleum Institute found.

Official figures are due later on Wednesday.

“A bullish sentiment is justified initially today on the US stocks news, but we believe bulls may need to take shelter back at the ranch in coming days, as COVID-19 takes again the centre stage,” Rystad Energy’s head of oil markets Bjornar Tonhaugen said.

Coronavirus cases continue to rise. In the United States, deaths are at more than a 1,000 a day, while dozens of states have had to pause or scale back plans to reopen their economies.

“We see gasoline demand coming in close to 7% year-on-year lower through Q3, with gasoil/diesel registering a decline of some 4%, implying a continued slowdown of the recovery, with a global return to 2019 levels this year increasingly in doubt,” JBC Energy said.

The consultancy sees jet fuel demand at 50% lower through Q3 compared with last year.

Sentiment drew some support from signs talks between Democrats in Congress and the White House on a new coronavirus relief package are making progress, although the sides remain far apart.

US factory data this week also showed an improvement in orders, which some analysts took as a hint of economic recovery.

Germany’s July IHS Markit services purchasing manager index rose to 55.6, its first time above the 50.0 mark that separates expansion from contraction since lockdown measures were introduced in March.