Oil was up on Wednesday morning in Asia after the American Petroleum Institute (API) recorded an inventory draw on Tuesday, but gains were capped over a worsening COVID-19 situation globally.
Brent oil futures was up 0.11% to $44.48 by 11:14 PM ET (4:14 AM GMT), reversing some earlier losses. WTI futures inched up 0.05% to $41.72.
The API reported a draw of 8.587 million barrels of crude for the week ending July 31. That was considerably higher than the 3.3 million barrel draw in forecasts.
The size of the draw suggests there may be enough demand to absorb an increase in production this month by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) and that could support oil prices.
But a huge explosion at Lebanon’s main port Beirut on Tuesday raised concerns about renewed instability in the Middle East, one of the largest oil producers. An investigation into the cause of the explosion is ongoing.
Meanwhile, the U.S. recorded more than 1,000 new COVID related deaths yesterday for the ninth day in a row. Australia’s Queensland state also announced that it would close its border with New South Wales today to hold back a second wave of COVID-19, dampening investor hopes of fuel demand recovery.
But there are signs that the U.S. Congress could be moving towards approving a COVID-19 aid package quickly after a meeting Tuesday ended on a positive note.
“Oil could be ready to test the upper boundaries of its recently tight range,” Edward Moya, senior market analyst at OANDA, told Reuters.
Investors will be looking at predictions from the U.S. Energy Information Administration (EIA), due later today.