Oil prices rose on Wednesday on worries about a possible second wave of coronavirus cases in countries starting to ease lockdowns, while industry data showed a rise in U.S. crude inventories.
The concerns overshadowed a further call by Saudi Arabia for larger production cuts to balance the market following a virus-induced demand slump, after OPEC’s biggest producer said earlier this week it planned to add to cut output again.
U.S. crude was up 28 cents, or 1.5%, at $26.07 a barrel, after jumping nearly 7% in the previous session.
Brent crude was up 48 cents, or 1.56%, at $29.90, having risen 1.2% on Tuesday.
“While the market feels more comfortable on the supply side of the equation, on the demand side, the focus will continue to revolve around the risks of easing lockdowns,” said Stephen Innes, chief markets strategist at AxiCorp.
U.S. infectious disease expert Anthony Fauci on Tuesday told Congress that easing coronavirus lockdowns may set off new outbreaks of the illness, which has killed 80,000 Americans and badly damaged the world’s biggest economy.
New outbreaks have been reported in South Korea and in China, where the health crisis started before spreading around the world, prompting governments to lock down billions of people, devastating economies and demand for oil.
On the supply side, Saudi Arabia’s cabinet has urged OPEC+ countries to reduce oil output further to restore balance in global crude markets, the country’s state news agency reported early on Wednesday.
On Monday, Saudia Arabia said it would add to planned cuts by reducing production by a further 1 million barrels per day (bpd) next month, bringing output down to 7.5 million bpd.
The Organization of the Petroleum Export Countries (OPEC) and other producers such as Russia – a group known as OPEC+ – agreed to cut output by 9.7 million barrels per day (bpd) in May and June, a record reduction, in response to a 30% fall in global fuel demand.
In the United States, inventories of crude oil rose by 7.6 million barrels last week to 526.2 million barrels, against analysts’ expectations for an increase of 4.1 million barrels.
Still, stocks of crude at the Cushing, Oklahoma, delivery hub fell by 2.3 million barrels, API said, which, if confirmed by official data, would be the first drawdown since February, according to ING Economics.
“Concerns over hitting storage capacity have eased, as we see demand gradually recovering, along with supply cuts hitting the market,” ING said in a note, pointing to the decline in Cushing stocks.
Official storage data from the U.S. Energy Information Administration is due later on Wednesday.