Oil up 1pc as US oil stocks fall, demand outlook brightens

NEW YORK: Oil prices rose for a third day on Wednesday as US crude inventories fell more sharply than expected, while pandemic-related restrictions in the United States and parts of Europe eased, heralding an increase in fuel demand for the summer months.

Brent crude was up 80 cents, or 1.2% higher at $69.68 a barrel at 11:30 a.m. EDT (1630 GMT). US West Texas Intermediate (WTI) crude rose 69 cents, or 1%, to $66.38 a barrel.

Both contracts hit their highest levels since mid-March in intraday trade on Wednesday.

US crude inventories fell by 8 million barrels in the week to April 30 to 485.1 million barrels, exceeding expectations for a 2.3 million-barrel drop, the Energy Information Administration said. Exports rose to 4.1 million bpd, the most since March of last year, and refining output was at its highest since that month as well.

"Refinery runs are only likely to move higher from here, and if we're going to get runs over 15 million bpd and exports over 3 million bpd we are going to consistently see draws going forward," said Matt Smith, director of commodity research at ClipperData.

The rise in oil prices to nearly two-month highs has been supported by COVID-19 vaccine rollouts. In the United States, more than 40% of US adults have received at least one shot, and more than half of adults in the United Kingdom.

Euro zone business activity accelerated last month as the bloc's dominant services industry shrugged off renewed lockdowns and returned to growth.

"The partial lifting of mobility restrictions, the expectation that tourism will return in the near future, and the lure of the psychologically important $70 mark are all likely to have contributed to the price rise," Commerzbank analyst Eugen Weinberg said.

This has offset a drop in fuel demand in India, the world's third-largest oil consumer, which is battling a surge in COVID-19 infections.

Indian official data showed the country's oil imports in March rose from the previous month, buoyed by an upturn in economic activity, but is expected to drop again because of renewed lockdowns in the world's third-largest crude importer.

"If we were to eventually see a national lockdown imposed, this would likely hit sentiment," ING Economics analysts said.