Oil climbs on solid demand outlook as market awaits fresh cues

U.S. West Texas Intermediate crude futures rose 29 cents, or 0.44%, to $65.57 a barrel at 0646 GMT

  
Workers are seen at the construction site of a crude oil terminal in Zhoushan, Zhejiang province, China March 18, 2018. Picture taken March 18, 2018. REUTERS/Stringer

Workers are seen at the construction site of a crude oil terminal in Zhoushan, Zhejiang province, China March 18, 2018. Picture taken March 18, 2018. REUTERS/Stringer

REUTERS

SINGAPORE - Oil prices rose on Wednesday after a drop in U.S. crude inventories reinforced OPEC's robust demand outlook, while the market awaited fresh updates on the Colonial Pipeline outage.

U.S. West Texas Intermediate (WTI) crude futures rose 29 cents, or 0.44%, to $65.57 a barrel at 0646 GMT, adding to a 36 cent rise on Tuesday.

Brent crude futures climbed 31 cents, or 0.45% to $68.86 a barrel, adding to a 23 cent gain on Tuesday.

"Oil markets maintained their wait-and-see approach to the noise and tail-chasing seen elsewhere overnight," Jeffrey Halley, OANDA senior market analyst, wrote in a Wednesday note.

"The Colonial pipeline cyberattack saga is dragging on and is now causing material shortages in the Eastern United States."

Gasoline stations from Florida to Virginia began running out of fuel on Tuesday as drivers rushed to top up their tanks and pump prices rocketed. 

U.S. unleaded gasoline prices hit an average $2.99 a gallon, the highest since November 2014, the American Automobile Association said. 

"While a prolonged outage would be supportive for refined product prices, it could start to weigh on crude oil prices, if refiners on the U.S. Gulf Coast are forced to reduce run rates due to a build-up of refined product inventories in PADD3," ING analysts wrote in a Wednesday note.

Colonial Pipeline has said it hopes to restart a large portion of the network by the end of the week.

Meanwhile, oil prices were supported by the latest outlook from the Organization of the Petroleum Exporting Countries (OPEC), which stuck to a forecast for a strong recovery in world oil demand in 2021 with growth in China and the United States outweighing the impact of the coronavirus crisis in India.

OPEC said it expects demand to rise by 5.95 million bpd this year, unchanged from its forecast last month. However, it cut its demand outlook for the second quarter by 300,000 bpd due to soaring COVID-19 infections in India.

Data from the American Petroleum Institute industry group showed U.S. crude oil stocks fell by 2.5 million barrels in the week to May 7, according to two market sources, slightly less than expected. 

The drawdown came before the Colonial Pipeline was hit by a cyberattack last Friday which forced the pipeline, which transports more than 2.5 million barrels a day of fuel, to shut down.

(Reporting by Shu Zhang and Sonali Paul; Editing by Stephen Coates) ((Sonali.Paul@thomsonreuters.com; +61 407 119 523))

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