Oil edged up to around $42 a barrel on Wednesday after a report said U.S. fuel inventories fell, although rising crude supply and growing numbers of coronavirus cases that raise concern of stalling demand capped gains.
The American Petroleum Institute, an industry group, said stocks of gasoline and distillate fuel dropped, while crude inventories rose. [API/S] Official inventory numbers from the Energy Information Administration are due at 1430 GMT.
“Sentiment remains fragile,” said Jeffrey Halley, analyst at broker OANDA. “A surprise increase could well be enough to initiate another downward leg in crude prices,” he said, referring to crude inventories.
Brent crude was up 23 cents, or 0.6%, to $41.95 at 1035 GMT, reversing an earlier drop. U.S. West Texas Intermediate crude was up 16 cents, or 0.4%, at $39.96. Both contracts fell more than 4% on Monday, though they rose on Tuesday.
“Oil prices are still faring comparatively well today given all the headwinds they are facing – a firm U.S. dollar, concerns about demand, rising supply,” said Carsten Fritsch of Commerzbank.
Surging infections in countries including India, France and Spain and new restrictions in Britain have renewed worries about demand, just as more supply may come from Libya. In the United States, the COVID-19 death toll has passed 200,000.
Oil collapsed as the pandemic decimated demand, with Brent falling below $16, a 21-year low, in April. A record output cut by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, has helped revive prices.
OPEC faces a new challenge in that Libya, an OPEC member exempt from the supply cut, is aiming to boost supply after an easing of the country’s conflict. Still, previous recoveries have not lasted.
“The road to recovery will be long and bumpy,” said Stephen Brennock of broker PVM.
Additional reporting by Aaron Sheldrick; editing by Kirsten Donovan and Mark Potter