Crude climbed on Wednesday after industry data showed U.S. oil inventories declined more than expected and OPEC raised its outlook for oil demand, but gains were capped by worries about the coronavirus and by rising supplies of the energy resource.
U.S. West Texas Intermediate (WTI) crude futures added $1.03, or 1.7%, to $61.48 a barrel, following Tuesday’s rise of 48 cents.
Brent crude futures rose $1.07, or 1.69%, to $65.02 a barrel after gaining 39 cents on Tuesday.
Signs of a strong economic recovery in China and the United States have underpinned recent oil price gains, but concerns over stalled vaccine rollouts worldwide and soaring COVID-19 infections in India and Brazil have capped gains.
“Continuing setbacks on vaccine rollouts and global cases nearing January’s peak is likely to hold a firm cap on crude’s ascent in the short term. At the same time, persistent optimism over a U.S. recovery and the world being on the cusp of emerging out of the COVID crisis is holding a floor,” said Vandana Hari, energy analyst at Vanda Insights.
A weakening U.S. dollar also “provided a mild upward push in recent days but there’s been no major bullish impetus to free crude from its narrow trading range,” she said.
A lower greenback, which hit three-week lows on Wednesday, makes crude purchases cheaper for countries using other currencies.
The Organization of the Petroleum Exporting Countries (OPEC) tweaked up its forecast on Tuesday for world oil demand growth this year, now expecting demand to rise by 5.95 million barrels per day (bpd) in 2021, up by 70,000 bpd from its forecast last month. It is banking on the pandemic to subside and travel curbs to be eased.
“It was a welcome prognosis by the market, which had been fretting about the impact the ongoing pandemic was having on demand,” ANZ Research analysts said in a note.
Further supporting the market on Wednesday, sources said data from the American Petroleum Institute showed crude stocks fell by 3.6 million barrels in the week ended April 9, compared with estimates for a decline of about 2.9 million barrels from analysts polled by Reuters.
Traders are waiting to see if official inventory data from the U.S. Energy Information Administration (EIA) on Wednesday matches that view.
Market gains are being capped on concerns about increased oil production in the United States and rising supply from Iran at a time when OPEC and its allies are set to bring on more supply from May.
EIA said this week oil output from seven major shale formations is expected to rise by 13,000 bpd in May to 7.61 million bpd.
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