Oil prices up as US crude inventories fall

London — Oil rose above $56 a barrel on Wednesday after industry data showed US crude inventories fell unexpectedly and as concerns eased about a resurgence in coronavirus cases in China, the world’s second-biggest oil user.

Industry group the American Petroleum Institute (API) said US crude inventories fell by 5.3-million barrels. Analysts had expected them to rise. Official inventory figures are due at 3.30pm GMT from the Energy Information Administration (EIA).

Brent crude climbed 51c, or 0.9%, to $56.42 a barrel at 9.20am GMT. US West Texas Intermediate (WTI) crude rose 41c, or 0.8%, to $53.02.

“Oil prices are edging higher this morning amid data pointing to an unexpected drop in US crude stocks,” said Stephen Brennock of broker PVM.

Brent is near an 11-month high of $57.42 reached on January 13, having recovered from a 21-year low below $16 in April 2020 due to a demand recovery particularly in China and huge supply cuts by oil cartel Opec and its allies, including Russia (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.”

In focus later will be the results of the US Federal Reserve’s two-day policy meeting. Analysts expect the central bank to stick to its dovish tone to help speed the economic recovery.

Still, rising coronavirus infections in places such as Britain and US are limiting gains, and China has recently grappled with a coronavirus resurgence.

However, official Chinese data showed 75 new confirmed cases of Covid-19 on Wednesday, the lowest daily rise since January 11, easing concern of a sharp drop in travel over the Lunar New Year when hundreds of millions typically travel. 

Reuters