Oil prices gain on US fuel drawdown despite rising COVID-19 cases

SINGAPORE: Oil prices rose on Wednesday after industry data showed US crude and product stockpile dropped more than expected last week, bolstering expectations that demand will outpace supply growth even amid a surge in COVID-19 infections.

Brent crude futures rose 28 cents, or 0.4%, to $74.76 a barrel at 0506 GMT, after shedding 2 cents on Tuesday in the first decline in six days.

US West Texas Intermediate (WTI) crude futures were up 33 cents, or 0.5%, at $71.98 a barrel, reversing Tuesday's 0.4% decline.

"Crude oil prices are steady ahead of the U.S inventory data from EIA on Wednesday as traders balance the spread of Delta variant coronavirus cases against tight supplies," said Avtar Sandu, a senior commodities manager at Singapore's Phillips Futures.

Crude oil demand: jittery road to recovery

Data from the American Petroleum Institute industry group showed US crude stocks fell by 4.7 million barrels for the week ended July 23, gasoline inventories dropped by 6.2 million barrels and distillate stocks were down 1.9 million barrels, according to two market sources, who spoke on condition of anonymity.

That compared with analysts' expectations for a 2.9 million fall in crude stocks, following a surprise rise in crude inventories the previous week in what was the first increase since May.

Traders are awaiting data from the US Energy Information Administration (EIA) on Wednesday to confirm the drop in stocks.

"A more significant than expected fall (in EIA data) could be enough to shake Brent and WTI out of their ranges and test the upside," said Jeffrey Halley, analyst at brokerage OANDA.

On gasoline stocks, analysts had expected a 900,000 barrel decline drop in the week to July 23.

Fuel demand expectations are undented by soaring cases of the highly infectious Delta variant of the coronavirus in the United States, the world's biggest oil consumer, where the seven-day average for new cases has risen to 57,126. That is about a quarter of the pandemic peak.

The International Monetary Fund on Tuesday maintained its 6% global growth forecast for 2021, upgrading its outlook for the United States and other wealthy economies but cutting estimates for developing countries struggling with surging COVID-19 infections.