Oil prices rose more than 1 percent on Wednesday after data showed crude inventories in the United States fell much more than expected, suggesting demand is improving even as the coronavirus outbreak spreads around the world.
Brent crude LCOc1 rose by 1.2 percent and the price stood at $41.75 a barrel after declining more than 1 percent on yesterday. U.S. crude was up 54 cents, or 1.4%, at $39.81 a barrel, having dropped by 1.1 percent in the previous session.
U.S. crude and gasoline stocks declined more than expected last week, while distillate inventories rose, data released by the American Petroleum Institute (API).
Crude inventories dropped by 8.2 million barrels to 537 million barrels, against analysts’ forecasts for a draw of 710,000 barrels and official inventory data from the U.S. government’s Energy Information Administration is due out later on Wednesday.
Also supporting prices was a drop in output from the Organization of the Petroleum Exporting Countries (OPEC) to the lowest in two decades in June.
The 13-member grouping produced an average of 22.62 million barrels per day (bpd) in June after they agreed to cut output, a Reuters survey found, down 1.92 million bpd from May’s revised figure.
“The fall in output means that OPEC over-complied with the deal in June, with compliance coming in at 107%,” ING Economics said, though noting that the over-compliance followed additional cuts by Saudi Arabia, the United Arab Emirates and Kuwait.
Those producers agreed to more cuts during June than other OPEC members.
“It is likely that compliance will slip again in July, unless we see a significant improvement in compliance from Iraq and Nigeria,” ING said.
Prices for later this year are likely to be capped, analysts said, as the world is awash with oil after the coronavirus caused demand for fuel to drop by around a third.
A Reuters poll of analysts indicated that oil prices will consolidate at around $40 a barrel this year, with a recovery potentially picking up in the fourth quarter.
The coronavirus continues to spread around the world with ever-increasing rates of infection. Cases now total more than 10 million with more than half a million people dying after catching COVID-19.