Oil prices drifted lower on Wednesday after two days of gains despite U.S. crude stocks falling more sharply than expected, as traders used the weekly inventory figures as an excuse to pull back from the recent rally.
Both Brent and U.S. futures contracts hit their highest levels since mid-March in intraday trade before retreating. The $70-per-barrel mark has acted as a barrier for the market since March, with investors unwilling to push oil higher as coronvirus infections surge in parts of the world.
Brent crude was down 5 cents to $68.83 a barrel. U.S. West Texas Intermediate (WTI) crude settled 6 cents, or 0.09%, lower at $65.63 per barrel.
U.S. crude inventories fell by 8 million barrels in the week to April 30 to 485.1 million barrels, exceeding expectations for a 2.3 million-barrel drop, the Energy Information Administration said. Exports rose to 4.1 million bpd, the most since March of last year, and refining output was at its highest since that month as well.
Pandemic-related restrictions in the United States and parts of Europe are easing, but infections are still on the rise in India and Japan.
The rise in oil prices to nearly two-month highs has been supported by COVID-19 vaccine rollouts. In the United States, more than 40% of U.S. adults have received at least one shot and more than half of adults in the United Kingdom, although numerous nations worldwide have only vaccinated a small percentage of their population.
"Refining activity should only increase from here on out, while Asian demand is set to bolster U.S. oil exports going forward," said Matt Smith, director of commodity research at ClipperData.
Euro zone business activity accelerated last month as the bloc's dominant services industry shrugged off renewed lockdowns and returned to growth.
India, the world's third-largest oil consumer, is battling a surge in COVID-19 infections. The country's oil imports in March rose from the previous month, buoyed by an upturn in economic activity, but are expected to drop again because of renewed lockdowns.
"If we were to eventually see a national lockdown imposed, this would likely hit sentiment," ING Economics analysts said.