Oil prices fell on Wednesday as the threat of rising global COVID-19 cases further hampering global fuel demand outweighed support from a bigger-than-expected drop in U.S. crude inventories.
Brent crude prices were down 46 cents at $56.12 a barrel by 12:43 p.m. EST (1743). An earlier rise took prices as high as $57.42 a barrel, the strongest since Feb. 24.
U.S. West Texas Intermediate (WTI) fell 26 cents to$52.95. The session high of $53.93 was its highest since Feb. 20.
U.S. crude inventories fell for a fifth straight week, dropping by 3.2 million barrels last week, exceeding analysts’ expectations in a Reuters poll for a 2.3 million-barrel drop, as refiners increased crude runs, the Energy Information Administration said.
“The refiners are starting to see a better demand picture and that’s being reflected not just what we’re seeing in the United States but also overseas,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
U.S. gasoline stocks, however, jumped by 4.4 million barrels, far higher than forecasts for a 2.7 million-barrel rise, EIA said, which sent mixed signals to investors about the strength of the U.S. oil market.
Adding to optimism over a tightening crude supplies worldwide, Saudi Arabia cut supplies of crude for February loading for at least three Asian buyers while meeting requirements of at least four others, several refinery and trade sources told Reuters.
But rising COVID-19 cases that continue to spur restrictions on travel and other activities by governments across the world limited oil prices and the pandemic is expected to cast a shadow on the market for months to come, analysts said.
“While I see crude prices trading higher over the coming months, investors need to be mindful that the road to higher oil demand and prices will remain bumpy,” UBS oil analyst Giovanni Staunovo said.
Governments across Europe announced tighter and longer coronavirus lockdowns on Wednesday over fears about a fast-spreading variant first detected in Britain, with vaccinations not expected to help much for another two to three months.
China recorded the biggest daily jump cases of the coronavirus in more than five months, despite four cities in lockdown, increased testing and other measures aimed at preventing another wave of infections in the world’s second biggest economy.