Oil above $56 as lower US stockpiles outweigh demand concerns

Oil rose above $56 a barrel on Wednesday after industry data showed US crude inventories fell unexpectedly, outweighing persistent concerns about demand as coronavirus cases top 100 million globally.

Industry group American Petroleum Institute (API) said US crude inventories fell by 5.3 million barrels. Analysts had expected them to rise. Official inventory figures are due at 1530 GMT from the Energy Information Administration.

Brent crude climbed $0.31, or 0.6%, to $56.22 a barrel by 1110 GMT. US West Texas Intermediate (WTI) crude rose $0.33, or 0.6%, to $52.94.

“Demand concerns should remain with us for some time,” said Eugen Weinberg of Commerzbank. “And yet the market currently appears determined to embrace the positive news instead.”

Brent is near an 11-month high of $57.42 reached on January 13, having recovered from a 21-year low below $16 in April due to a demand recovery particularly in China and huge supply cuts by the Organisation of the Petroleum Exporting Countries and its allies, known as OPEC+.

“Oil continues consolidating,” said Jeffrey Halley of brokerage Oanda. “The Saudi Arabian cuts, OPEC+ compliance above 85% and an insatiable demand from Asia mean that oil has seen its cyclical lows for 2021.”

In focus later will be results of the US Federal Reserve’s two-day policy meeting. Analysts expect the central bank to stick to its dovish tone to help speed the economic recovery.

Still, the number of global coronavirus cases has surpassed 100 million as infections rise in Europe and the Americas, and Asia scrambles to contain fresh outbreaks.

China, the second-largest oil consumer, has recently grappled with coronavirus resurgence, but official Chinese data showed 75 new confirmed cases of Covid-19 on Wednesday, the lowest daily rise since January 11.

This eased concern about a sharp drop in travel that threatened a new hit to demand over the Lunar New Year, when hundreds of millions typically make journeys.