Oil prices at 5-month high on big drop in US crude stocks

LONDON: Oil prices rose to their highest since early March on Wednesday after data showed a big drop in US crude inventories, although concerns that mounting coronavirus infections will lead to reduced fuel demand capped gains.

Brent crude was up $1.03, or 2.3pc, at $45.46 a barrel by 0951 GMT, while West Texas Intermediate oil rose $1.03 cents, or 2.5pc, to $42.73 a barrel.

US crude inventories fell 8.6 million barrels in the week to Aug. 1 to 520 million barrels, compared with analysts' expectations for a 3 million barrel drop, the American Petroleum Institute found.

Official figures are due later on Wednesday.

"A bullish sentiment is justified initially today on the US stocks news, but we believe bulls may need to take shelter back at the ranch in coming days, as COVID-19 takes again the centre stage," Rystad Energy's head of oil markets Bjornar Tonhaugen said.

Global coronavirus deaths surpassed 700,000 on Wednesday, according to a Reuters tally, with the United States, Brazil, India and Mexico leading the rise in fatalities.

"We see gasoline demand coming in close to 7pc year-on-year lower through Q3, with gasoil/diesel registering a decline of some 4pc, implying a continued slowdown of the recovery, with a global return to 2019 levels this year increasingly in doubt," JBC Energy said.

The consultancy sees jet fuel demand at 50pc lower through Q3 compared with last year.

Sentiment drew some support from signs talks between Democrats in Congress and the White House on a new coronavirus relief package are making progress, although the sides remain far apart.

US factory data this week also showed an improvement in orders, which some analysts took as a hint of economic recovery.

Euro zone business activity returned to modest growth in July as some curbs imposed to stop the spread of the coronavirus eased, the Composite Purchasing Managers' Index from IHS Markit showed on Wednesday.