Oil climbs as risk appetite returns despite virus fears

Oil prices rose about 4 percent on Wednesday, extending gains from the previous session as improved risk appetite provided support despite data showing an unexpected rise in US oil inventories.

Brent crude futures gained $2.53, or 3.7 percent, to $71.88 a barrel by 10:48 a.m. EDT (1448 GMT). US West Texas Intermediate (WTI) crude futures rose $2.69, or 4 percent, to $69.89 a barrel.

Futures are rebounding after dropping around 7 percent on Monday, following a deal by the Organization of the Petroleum Exporting Countries and allies, together known as OPEC+, to boost supply by 400,000 barrels per day (bpd) from August through December. The sell-off was exacerbated by fears that a rise in cases of the delta variant of the coronavirus in major markets like the US, Britain and Japan will affect demand.

The price gains on Wednesday also come despite a rise in US crude stockpiles for the first time since May. Crude inventories rose unexpectedly by 2.1 million barrels last week to 439.7 million barrels, US Energy Information Administration data showed. Analysts had expected a 4.5 million barrel drop.

Still, gasoline and distillate inventories posted draws of 121,000 barrels and 1.3 million barrels, respectively.

“That crude oil build was obviously a surprise driven by a surge in imports and a plunge in exports,” said John Kilduff, partner at Again Capital in New York. “The only positive aspects of the report remain strong gasoline demand and a rebound in distillate fuels.”

JPMorgan analysts said global demand is expected to average 99.6 million bpd in August, up by 5.4 mbd from April. But they also said: “We only see 4Q21 demand recovering another incremental 330,000 vs. a normalized 2019 baseline as colder weather sets in for the northern hemisphere and peak travel season is behind us.”