Oil rises slightly as inventory draw outweighs demand worries

Oil prices were little changed on Wednesday as concerns lingered over soft U.S. fuel demand while global producers feared a second prolonged wave of the coronavirus pandemic was a major risk for the market recovery.

U.S. crude oil stockpiles fell 1.6 million barrels last week, while fuel demand was down 14% from the year-ago period over the last four weeks, Energy Information Administration data showed.

“The drop in gasoline demand week-over-week was a concern. That’s still showing weakness,” said Phil Flynn, a senior analyst at Price Futures Group in Chicago. “The only thing that is holding us back is demand,” he said.

Brent crude futures were down 13 cents at $45.33 a barrel, but still not far off a five-month high above $46 a barrel reached earlier in August.

West Texas Intermediate crude settled 4 cents higher at $42.93 per barrel. 

Global oil demand should recover to pre-pandemic levels as soon as the fourth quarter, the Saudi Energy minister said, while urging compliance with a global deal to cut output.

The Organization of the Petroleum Exporting Countries and its allies such as Russia, a grouping dubbed OPEC+, began a meeting on Wednesday to review the compliance levels with the deal, aimed at supporting prices. .

“Based on the average projections of various institutions, … it is estimated that the world will reach about 97% of pre-pandemic oil demand during the fourth quarter – which is a big recovery from the huge falls in April and May,” said Prince Abdulaziz bin Salman. A draft OPEC+ statement, seen by Reuters, said a second prolonged wave of the pandemic was a major risk for the oil market recovery.

OPEC+ sources have said the group was unlikely to change on Wednesday its output policy, which currently calls for reducing output by 7.7 million barrels per day (bpd) versus a record high 9.7 million bpd up until this month.