Oil up but rise dampened by demand fears

Oil was up on Thursday morning in Asia, continuing its gains from the previous session.

Brent oil futures gained 0.59% to $36.01 by 9:34 PM ET (2:34 AM GMT) and WTI futures were up 0.45% to $33.64.

The US Energy Information Administration (EIA) reported a 4.983 million-barrel draw in crude oil inventories for the week up to May 15 on Wednesday. The American Petroleum Institute (API) also reported a 4.8 million-barrel draw for the same period on Tuesday.

WTI futures jumped up to 4.79% and Brent futures rose 3.2% during the previous session on the back of the report, buoyed by improved investor sentiment as production cuts implemented by OPEC+ and other suppliers finally showed results.

Investor sentiment was also up after initial shipping data showed that compliance to the agreed cuts by OPEC and its allies has so far been strong.

Easing lockdowns in some US states and countries has also increased demand.

But the United States, the biggest global oil consumer, is still dealing with high Covid-19 cases and the economic impact of the lockdowns. In Asia, India, the world’s third biggest buyer, has extended its months-long lockdown until May 31 to curb the spread of Covid-19.

Investor concerns led to more modest gains during the current session.

“While signs that WTI storage pressures are abating is positive for prices, the latest report shows that the fall in stocks owes more to supply factors than growing product demand,” Capital Economics said in a note on Wednesday.

“We expect this to be the story for some time yet as OPEC+ cuts help to put a floor under prices in the second half of this year.”

Meanwhile, minutes from the US Federal Reserve’s April 28-29 policy meeting released overnight revealed that policymakers repeated their vow to take all necessary steps to shore up the US economic recovery.

By Investing.com: https://www.investing.com/news/commodities-news/oil-up-after-production-cuts-show-effects-but-held-back-by-demand-fears-2178860