Oil lifts on expectation that stocks have fallen

London — Oil rose towards $75 a barrel on Wednesday ahead of an industry report expected to show US crude inventories dropped more than expected, bringing the focus back to a tight supply and demand balance rather than rising coronavirus infections.

US crude stocks fell 4.7-million barrels, two market sources citing American Petroleum Institute figures said, more than analysts forecast. Official US Energy Information Administration inventory figures are out at 2.30pm GMT.

“This price catalyst may inject some much-needed momentum into proceedings, especially after the API set a bullish tone,” said Stephen Brennock of broker PVM, referring to the EIA report.

Brent crude rose 34c, or 0.5%, to $74.82 a barrel at 8.20am GMT, after posting on Tuesday its first decline in six days. US. West Texas Intermediate (WTI) crude advanced 40c, or 0.6%, to $72.05.

Oil has risen 44% in 2021, helped by demand recovery and supply curbs by Opec+.

Opec+ agreed to increase supply by 400,000 barrels per day from August, unwinding more of 2020’s record supply cut, but this is seen as too low by some analysts given the rebound in demand expected in 2021.

“Oil supply is likely to remain tight even with the production hikes set by Opec+," said Naeem Aslam of online broker AvaTrade.

A rising number of coronavirus cases worldwide, despite vaccination programmes, has limited the upside for oil and remains a concern.

As well as the EIA report, a statement from a US. Federal Reserve policy meeting due at 6pm GMT will also be in focus. The dollar was firmer ahead of the meeting, which tends to weigh on oil as it makes crude more expensive for other currency holders. 

Reuters