Oil prices rose 3% on Wednesday as China reported its lowest daily number of new coronavirus cases since late January, stoking investor hopes that fuel demand in the world’s second-largest oil consumer may begin to recover.
Prices held gains, as the U.S. government’s report of a larger-than-forecast weekly build in crude inventories was countered by a decline in fuel stocks, including an unexpected gasoline drawdown.
Crude inventories USOILC=ECI rose 7.5 million barrels last week, the Energy Information Administration said, compared with analysts’ expectations in a Reuters poll for a 3 million-barrel rise.
“Gasoline demand is starting to rebound, and the modest drawdown in refined fuels helped to offset the bearish, blaring crude oil headline,” said John Kilduff, a partner at Again Capital in New York.
Brent crude LCOc1 was up $1.82, or 3.3%, at $55.83 per barrel at 10:42 a.m. EST (1542 GMT). U.S. West Texas Intermediate (WTI) CLc1 rose $1.40 a barrel, or 2.8%, to $51.34 a barrel.
According to data through Tuesday, the growth rate of new coronavirus cases in China has slowed to the lowest since Jan. 30. Still, international experts remained cautious over forecasting when the outbreak might peak.
“As the growth rate of new cases has decreased … that has improved the (market) sentiment,” said Kim Kwang-rae, commodities analyst at Samsung Futures in Seoul.
Travel restrictions to and from China and quarantines have cut fuel usage. The two biggest Chinese refiners have said they will reduce their processing by about 940,000 barrels per day (bpd) as a result of the consumption drop, or about 7% of their 2019 processing runs.
The Organization of the Petroleum Exporting Countries cut its forecast for global growth in oil demand due to coronavirus by 230,000 bpd – a fairly modest assessment compared with other forecasters. The U.S. government on Tuesday cut its growth forecast for this year by 310,000 bpd. The demand concerns from the outbreak pushed Brent and WTI to their lowest in 13 months on Monday. Both benchmarks are down more than 20% from highs reached in January.
On the supply side, OPEC recommended a further cut of 600,000 bpd last week to stem the oil price fall. OPEC is now waiting for a response from ally Russia whether Moscow would help execute the cuts. “Clearly, the ongoing developments in China require continuous monitoring and assessment,” OPEC said. Russian energy minister was due to meet local oil producers later on Wednesday to discuss cuts.—Reuters