Oil jumps 2% ahead of U.S. inventory data

A woman wearing a face mask walks on the ocean front while oil tankers are seen anchored off the coast of Long Beach, California, after sunset on April 25, 2020.
Apu Gomes | AFP | Getty Images

Oil prices strengthened on Wednesday, as equities also rose and the dollar traded lower, even as concerns loomed that recovery in fuel demand will be stalled by soaring global coronavirus cases.

Wall Street's main indexes opened higher on Wednesday, supported by heavyweight technology stocks. The dollar traded lower, which can boost oil as investors switch asset classes.

"Between the dollar, the EIA and the warning from the IEA that may impact future OPEC policy, the tone has turned bullish here," said Bob Yawger, director of energy futures at Mizuho in New York.

Data from the U.S. Energy Information Administration (EIA) is expected to show crude oil stockpiles moving lower in the latest week, according to analysts polled by Reuters

Brent crude futures for December delivery were up 49 cents, or 1.18%, at $42.94 a barrel. West Texas Intermediate futures settled 84 cents, or 2.1%, higher at $41.04 per barrel.

"There is a risk that the demand recovery is stalled by the recent increase in COVID-19 cases in many countries," the International Energy Agency said on Wednesday.

"The longer term offers little encouragement for producers; the curve shows prices not reaching $50 per barrel until 2023. Truly, those wishing to bring about a tighter oil market are looking at a moving target."

The Organization of the Petroleum Exporting Countries (OPEC) cut its oil demand forecast on Tuesday, citing economic dislocations caused by the virus.

Russian Energy Minister Alexander Novak said that leading oil producers will start easing output curbs as planned in January despite a spike in coronavirus cases.

U.S. crude oil inventories were seen falling last week while distillate stockpiles are likely to have declined for a fourth week, a preliminary Reuters poll showed on Tuesday.

The poll was conducted ahead of reports from the American Petroleum Institute and the Energy Information Administration. Both reports were delayed by a day because of a public holiday in the United States on Monday.