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Oil futures held modest gains early Wednesday after industry data showed a large drop in U.S. crude inventories but a build in product supplies ahead of official figures.
Crude was boosted in Tuesday’s session after the Organization of the Petroleum Exporting Countries and its allies — known together as OPEC+ — held to plans to boost output by 400,000 barrels a day in February.
West Texas Intermediate crude for February delivery
CL00,
CLG22,
rose 27 cents, or 0.4%, to $77.26 a barrel on the New York Mercantile Exchange. March Brent crude
BRN00,
BRNH22,
the global benchmark, was up 34 cents, or 0.4%, at $80.34 after both grades ended at five-week highs.
“The move from OPEC+ provides some comfort to the market as it signals that they are confident with the demand outlook in the coming months,” said Warren Patterson, head of commodities strategy at ING, in a note.
While oil has bounced back from the selloff sparked by the discovery of the omicron variant of the coronavirus that causes COVID-19 in late November, the market might not be out of the woods, he said, noting reports that China put a second city — Yuzhou, with a population of 1.1 million — under lockdown after discovering three asymptomatic cases of COVID-19. The 13 million residents of Xi’an have been under lockdown restrictions since Dec. 23.
“Clearly, China continues to pursue its zero-COVID policy and if we were to see more widespread lockdowns domestically that would be a concern for oil demand,” Patterson said.
Read: Failed China ‘zero-COVID’ policy tops list of 2022 geopolitical risks: Eurasia Group
The American Petroleum Institute reported late Tuesday that U.S. crude supplies fell by 6.4 million barrels in the week ended Dec. 31, according to sources. The API also reportedly showed weekly inventory increases of 7.1 million barrels for gasoline and 4.3 million barrel for distillates. Crude stocks at the Cushing, Okla., delivery hub rose by 2.3 million barrels last week, sources said.
Inventory data from the Energy Information Administration will be released Wednesday. On average, the EIA is expected to show crude inventories down by 4.4 million barrels, according to a survey of analysts conducted by S&P Global Platts. The survey also calls for weekly supply increases of 1.9 million barrels each for the gasoline and distillate categories.
