An oil and gas drilling platform stands offshore in the Gulf of Mexico in Dauphin Island, Alabama. Picture: REUTERS/STEVE NESIUS
An oil and gas drilling platform stands offshore in the Gulf of Mexico in Dauphin Island, Alabama. Picture: REUTERS/STEVE NESIUS

Seoul — Oil prices rose on Wednesday amid signs of improving demand and a drawdown in US crude inventories but the worry over the economic fallout from the coronavirus pandemic capped gains.

Brent crude futures for July delivery were up 23c, or 0.7%, at $34.88 a barrel at 3.47am GMT.

US West Texas Intermediate (WTI) crude futures for July were up 14c, or 0.4%, at $32.10 a barrel. The July contract closed on Tuesday at $31.96, up 1%.

The June contract expired on Tuesday at $32.50 a barrel, up 2.1%, as the WTI futures market avoided the chaos of last month’s May expiry, when prices sank below zero.

Oil prices have mainly risen during the past three weeks, with both benchmarks climbing above $30 for the first time in more than a month on Monday, supported by huge output cuts by major oil-producing countries and signs of improving demand.

US crude inventories fell by 4.8-million barrels to 521.3-million barrels in the week to May 15, data from industry group the American Petroleum Institute (API) showed on Tuesday.

Refinery runs rose by 229,000 barrels a day, the API said, a sign that plants are trying to produce more fuel as the US eases its lockdowns put in place to halt the spread of the novel coronavirus.

Official data from the Energy Information Administration (EIA) is due at 2.30pm GMT on Wednesday.

“Oil markets have worried about high crude inventories but yesterday the WTI June contract expired and rolled over to July smoothly as concerns over crude stocks ease and demand has improved in the short term,” said Kim Kwang-rae, commodity analyst at Samsung Securities in Seoul.

Asia’s petrol profit margins turned positive on Tuesday for the first in nearly two months, giving hope to global oil refiners.

But the lingering concern about the economic fallout from the coronavirus pandemic, especially in the US which is the world’s biggest oil consumer, kept a lid on prices.

US Federal Reserve chair Jerome Powell said on Tuesday layoffs by state and local governments will slow the US economic recovery, while Boston Federal Reserve Bank president Eric Rosengren said the US unemployment rate is likely to stay at double-digit levels through the end of the year.

Reuters