Oil prices rose on Wednesday as a more-than-expected decrease in US crude oil inventories and a decline in coronavirus cases in China, the world’s second largest consumer, relieved investor fears over a fall in demand.
International benchmark Brent crude was trading at $55.98 per barrel at 0703 GMT for a 0.61% increase after closing Tuesday at $55.64 a barrel.
American benchmark West Texas Intermediate (WTI) was at $52.97 per barrel at the same time for a 0.68% increase after it ended the previous session at $52.61 a barrel.
Late Tuesday, the American Petroleum Institute (API) announced its estimate of a fall of 5.3 million barrels in US crude oil inventories relative to the market expectation of a 603,000-barrel rise.
If crude stocks fall in line with the API’s expectations, it signals a rebound in crude demand in the US, the world's largest oil consumer, to positively support prices.
Further adding to demand euphoria in support of an upward price trend, a recent decrease emerged in the number of the cases in China amid a renewal of cases after a 10-month hiatus, which followed on from lockdowns and strict restrictions in some provinces.
The number of cases dropped to single digits in the country in two of the provinces that were especially hard hit by the current coronavirus wave, according to official data.
“The elephant in the room is now oil demand and how the latest lockdowns and restrictions globally are affecting it. Oil demand is definitely under pressure currently and will be for a while until lockdowns are lifted and Covid-19 infection speed slows down,” said Norway-based Rystad Energy’s head of oil markets, Bjornar Tonhaugen.
Tonhaugen said Saudi Arabia’s move to reduce output by an extra 1 million barrels per day (bpd) is still supporting prices, however, without it, “prices would be very different now, under current demand trends, so the kingdom’s move definitely proved to be a catalyst for healthy price levels to hold.”
An explosion in the Saudi capital Riyadh on Tuesday, three days after the kingdom intercepted and destroyed a projectile, fueled supply concerns to exert upward price pressure.
On Saturday, the Saudi-led military coalition said it had intercepted and destroyed an "enemy air target" launched towards Riyadh.
Yemen's Houthi forces have frequently carried out cross-border attacks since 2015 when coalition forces intervened to restore the government the Iran-aligned group ousted from power.