Oil posts slight gain as U.S. inventory declines

A line of oil tankers transporting fuel to the refineries located along the Mississippi River just north of New Orleans, Louisiana.

Art Wager | Getty Images

Oil rose more than 1% on Wednesday, supported by U.S. government data that showed crude and fuel inventories dropped last week, although concerns about the ongoing coronavirus pandemic capped gains.

Brent crude rose 53 cents, or 1.3%, to $42.25 a barrel. U.S. West Texas Intermediate crude settled 13 cents, or 0.3%, higher at $39.93 per barrel.

U.S. crude, gasoline and distillate inventories all fell last week, Energy Information Administration data showed. Crude inventories fell by 1.6 million barrels, less than forecast; gasoline stocks dropped more than expected, sliding by 4 million barrels; while distillate stockpiles posted a surprise drawdown of 3.4 million barrels.

"The distillate overhang that we've seen most of this year has been a primary bearish consideration to the energy complex and as that begins to adjust lower that can be viewed as supportive," said Tony Headrick, energy markets analyst at CHS Hedging.

Elsewhere, better-than-expected German manufacturing data lifted some risk appetite on Wednesday.

But COVID-19 infections in countries including India, France and Spain and new restrictions in Britain have renewed worries about demand, just as more supply may come from Libya. In the United States, the death toll has passed 200,000.

Oil collapsed as the pandemic decimated demand, with Brent falling below $16, a 21-year low, in April. A record output cut by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, has helped revive prices.

OPEC faces a new challenge in that Libya, an OPEC member exempt from the supply cut, is aiming to boost supply after an easing of the country's conflict. An oil tanker is expected to load crude at Libya's Marsa el-Hariga terminal this week, the first since January.