Expectations of higher demand feed oil rally

Tokyo — Oil prices rose again on Wednesday, extending their more than weeklong rally after industry data showing a fall in US crude oil stocks added to optimism about an expected rise in global fuel demand.

Brent crude was up 11c, or 0.2%, at $61.20 by 0110 GMT after rising nearly 1% on Tuesday, when it touched a 13-month high. US crude added 2c to $58.28.

Crude inventories fell by 3.5-million barrels in the week to February 5 to about 474.1-million barrels, data from the American Petroleum Institute (API) showed on Tuesday. That compared with analysts’ expectations in a Reuters poll for an increase of 985,000 barrels. Official Energy Information Administration (EIA) data is due at 1530 GMT on Wednesday.

“A reading similar to the one reported by the API would likely continue to provide support to the market,” ING Economics said in a note.

Crude oil stocks at the Cushing, Oklahoma, delivery point dropped by 1.4-million barrels, the API said. Still, petrol inventories rose 4.8-million barrels, compared with analysts’ forecasts in a Reuters poll for a build-up of 1.8-million barrels. Official data is due later on Wednesday.

Oil prices have rallied since November as governments kicked off vaccination drives for Covid-19, while putting in place large stimulus packages to boost economic activity.

The world’s biggest exporter, Saudi Arabia, is unilaterally reducing supply in February and March, adding to cuts agreed by other members of oil cartel Opec and their allies.

Some analysts are now forecasting there will be a supply deficit in 2021 as more populations get vaccinated and start going away on trips and working in offices, potentially boosting fuel demand.

Reuters