Oil prices rose on Wednesday, extending gains from the previous session as improved risk appetite provided support despite data showing an unexpected rise in U.S. oil inventories last week and a weaker demand outlook due to rising COVID-19 infections.
Brent crude futures gained $1.08, or 1.5%, to $70.42 per barrel, having hit a session low of $68.63 a barrel.
U.S. West Texas Intermediate (WTI) crude futures rose $1.04, or 1.55%, to trade at $68.24 a barrel, after falling to $66.44 a barrel earlier on Wednesday.
“Oil ... is appearing to have found support as risk appetite increases once again,” Ricardo Evangelista, ActivTrades analyst said.
“This support comes after the pronounced falls registered during the last few sessions, which were triggered by apprehension over the impact the Delta variant ..., as well as the agreement between OPEC+ countries to increase production,” he added.
Oil prices dropped on Monday following a deal by the Organization of the Petroleum Exporting Countries and allies, together known as OPEC+, to boost supply by 400,000 bpd each month from August through December. The sell-off was exacerbated by fears that a rise in cases of the Delta variant of the coronavirus in major markets like the United States, Britain and Japan will affect demand.
A potential rise in U.S. inventories weighed on prices earlier in the session.
U.S. crude stocks rose by 806,000 barrels for the week that ended July 16, according to two market sources, citing American Petroleum Institute figures.
Analysts polled by Reuters were expecting a large fall in inventories. Official U.S. Energy Information Administration data is due later on Wednesday.
JPMorgan analysts said global demand is expected to average 99.6 million barrels per day in August, up by 5.4 mbd from April. But they also said: “We only see 4Q21 demand recovering another incremental 330,000 vs a normalised 2019 baseline as colder weather sets in for the northern hemisphere and peak travel season is behind us.”