Oil was up Wednesday morning in Asia, boosted by a draw in U.S. crude supplies that reinforced expectations that fuel demand will outstrip supply growth. However, increasing numbers of COVID-19 cases globally capped the black liquid’s gains.
Brent oil futures gained 0.65% to $74 by 11:26 PM ET (3:26 AM GMT) after shedding 2 cents during the previous session in its first decline in six days. WTI futures rose 0.77% to $72.20, reversing its 0.4% decline on Tuesday.
U.S. crude oil supply data released on Tuesday from the American Petroleum Institute showed a draw of 4.728 million barrels for the week ended Jul. 23. Forecasts prepared by Investing.com had predicted a 3.433-million-barrel draw, while a build of 806,000 barrels was reported during the previous week.
Investors now await crude oil supply data from the U.S. Energy Information Administration (EIA), due later in the day.
“Most energy traders were unfazed by the previous week’s build, so expectations should be high for the EIA crude oil inventory data to confirm inventories resumed their declining trend,” OANDA analyst Edward Moya said in a note.
The API data also said gasoline inventory fell by 6.226 million barrels.
“The U.S. is still in peak driving season and everyone is trying to make the most of this summer,” Moya said in his note.
Global inventories are expected to tighten through the remainder of 2021 as key countries in the market continue their economic recovery from COVID-19. However, surging numbers of cases involving the virus’ Delta variant has led many countries to reimpose restrictive measures and the black liquid is set to record its second monthly loss since October 2020.
Refiners, making some of their best profits in years, continue to be challenged by the rising number of COVID-19 cases and its impact on the fuel demand outlook. Concerns that renewed demand weakness could lead to bloated stockpiles and squeeze margins again are getting in the way of processors’ desires to cash in.
“The biggest risk to oil prices is still the Delta variant of COVID-19, with many countries still coming to terms with their outbreaks,” DBS Bank Ltd. energy sector lead for group research Suvro Sarkar told Bloomberg.
However, “U.S. and Europe demand should continue to support prices for the moment,” he added.