08:56 AM EDT, 08/18/2021 (MT Newswires) -- Oil traded higher early on Wednesday following four losing sessions following a report that U.S. oil inventories fell last week, easing some demand worries, even as the spread of the Covid-19 delta variant continues.
West Texas Intermediate crude oil for September delivery was last seen up US$0.63 to US$67.22 per barrel, while October Brent crude, the global benchmark, was up US$0.77 to US$69.80.
The rise follows on a 3.8% drop in prices over the past four losing sessions, which came on worries that the wildfire spread of Covid-19 in the United States and Southeast Asia is lowering demand. Japan broadened its state of emergency to cover 60% of its citizens because of the rapid rise of infections, cutting fuel use as travel restrictions are enforced.
"This is likely to impact fuel demand in Japan, which is the world's fourth-largest oil consumer and importer. It will therefore take longer no doubt for last year's slump in demand to recover," Commerzbank analyst Carsten Fritsch said in a note.
However the American Petroleum Institute on Tuesday said U.S. oil inventories last week fell by 1.16-million barrels last week and gasoline stocks dropped by 2-million barrels, according to reports, moderating those worries.
The Energy Information Administration will release its weekly look at U.S. oil supply and demand later on Wednesday morning, with the agency expected to report an inventory drop of 1.5-million barrels, according to a Bloomberg survey.
The International Energy Agency last week said it expects oil demand to fall by more than half a million barrels per day in the second half of this year, even as OPEC+ continues with plans to add 400,000 bpd of additional supply monthly as the end of the U.S. driving season approaches, lowering the call for gasoline and raising concern over prices going forward.
"We doubt that all the negative factors are fully priced in, and think prices had overshot their fundamental values in the past anyway. Thus, the selling pressure is likely to continue for a while yet, and with the potential breakdown of key support levels, we may see increased technical selling activity too. As a result, oil prices could fall more abruptly going forward," Victor Argonov, senior analyst at International Fintech EXANTE, said in a note.