Coronavirus: Oil prices gain on fall in crude stockpiles

Oil prices rose on Thursday, reversing early losses, as a sharp drop in oil stockpiles outweighed concerns that a spike in U.S. coronavirus infections and revived lockdown measures in California could stall a recovery in fuel demand.

U.S. West Texas Intermediate (WTI) crude CLc1 futures rose 25 cents, or 0.6%, to $40.07 a barrel by 0632 GMT, adding to a 1.4% rise from Wednesday.

Brent crude LCOc1 futures was up 25 cents or 0.6% at $42.28 a barrel, after rising 1.8% in the previous session.

U.S. Energy Information Administration data showed U.S. crude inventories USOILC=ECI fell 7.2 million barrels from a record high last week, far more than analysts had expected, as refiners ramped up production and imports eased. [EIA/S]

The drop in stockpiles, reports of oil moving out of floating storage and strong manufacturing PMI data across the globe formed a constructive case for oil prices rising, said Jeffrey Halley of OANDA in a daily note.

“The overnight price action and EIA data have temporarily lifted the COVID-19 gloom that has capped oil prices all week,” Halley said.

Capping gains, however, analysts also noted that gasoline stockpiles were higher despite expectations of a fall.

“Counter-seasonal builds in gasoline inventories as stockpiles unexpectedly rose are not precisely a bullish delight,” AxiCorp strategist Stephen Innes said in a note.

“The EIA data showed that gasoline imports hit the highest level since last August and peaked the most on a seasonal basis in nine years.”

Meanwhile, new U.S. COVID-19 cases rose by nearly 50,000 on Wednesday, according to a Reuters tally, in the biggest one-day spike since the start of the pandemic.

Analysts highlighted worries about the spike in cases in heavily populated U.S. sun belt states, which are among the country’s biggest consumers of gasoline.

California, meanwhile, rolled back efforts to reopen its economy, banning indoor restaurant dining in much of the state, closing bars and beefing up enforcement of social distancing and other measures.

All eyes will be on driving activity in the United States over the upcoming July 4th holiday weekend and how quickly U.S. producers revive shut-in production, analysts said.