Oil prices rally further after crude stocks fall more than expected

TOKYO: Oil prices were higher on Wednesday, with US crude gaining for the seventh straight day, after industry data showed a bigger than expected drop in inventories and investors shrugged off rising new deaths and infections in the pandemic.

US West Texas Intermediate (WTI) was up 34 cents, or 0.6%, at $53.55 a barrel by 0805 GMT after gaining nearly 2% on Tuesday. Brent crude was up 36 cents, or 0.6%, at $$56.94, having risen 1.7% in the previous session.

Both benchmarks are trading at the highest since February, before the coronavirus outbreak in China began spreading across the world and billions of people went into lockdown to prevent a pandemic that is now in a deadlier second wave. Prices are shrugging off the latest developments in Europe and the United States where death tolls and new infections keep rising, with the focus on rollouts of vaccines, however patchy.

Even as China is grappling with its biggest coronavirus spike in months, comments from President Xi Jinping providing an upbeat assessment of the world's second-biggest economy and biggest oil importer supported prices.

"Crude oil prices also continued to rally ... on economic optimism in China after President's Xi comments and an inventory report from API showed that crude oil inventories fell more than expected," said Avtar Sandu, senior manager commodities at Phillip Futures.

Oil stocks in the US dropped by 5.8 million barrels last week to around 484.5 million barrels, data from the American Petroleum Institute showed late on Tuesday.

That was more than analysts' expectations in a Reuters poll for a fall of 2.3 million barrels.

Still, falling inventories and rising oil prices are likely to tempt US drillers back into the fray, especially as Saudi Arabia and other major producers cut their output, effectively ceding market share to American producers, analysts said.

Saudi Arabia cut supplies of crude for February loading for at least three Asian buyers while meeting requirements of at least four others, several refinery and trade sources told Reuters on Wednesday.