Oil rises after larger-than-expected U.S. inventory drop

West Texas Intermediate oil was up 9 cents, or 0.2%, at $41.70 a barrel

  
Image used for illustrative purpose. Flames come out of chimeys at the French oil giant Total Refinery in Donges, France, December 20, 2019.

Image used for illustrative purpose. Flames come out of chimeys at the French oil giant Total Refinery in Donges, France, December 20, 2019.

REUTERS/Stephane Mahe

LONDON - Oil prices rose on Wednesday after an industry report showed U.S. crude inventories last week fell more than analysts had expected, bolstering hopes that fuel demand in the world's biggest economy can weather the coronavirus pandemic.

Brent crude was up 68 cents, or 1.5%, at $45.18 a barrel by 1350 GMT, after falling around 1% on Tuesday.

West Texas Intermediate oil was up 74 cents, or 1.8%, at $42.35 a barrel, having dropped 0.8% in the previous session.

The American Petroleum Institute API said on Tuesday that crude stocks fell by 4 million barrels last week, versus analysts' expectations in a Reuters poll for a draw of 2.9 million barrels.

It also showed falls in gasoline and distillate stocks. Official government data is due later on Wednesday. 

The "fall in U.S. API crude inventories..., the third sizeable weekly fall in a row, has supported prices today," said Jeffrey Halley, senior market analyst at OANDA.

A downward revision to a key U.S. oil production forecast for this year also lent support to prices.

The U.S. Energy Information Administration now expects U.S. crude production to fall by 990,000 barrels per day (bpd) this year to 11.26 million bpd, steeper than the 600,000 bpd decline it forecast last month. 

World oil demand will fall by 9.06 million bpd this year, the Organization of the Petroleum Exporting Countries said in a monthly report on Wednesday, more than the 8.95 million bpd decline expected a month ago. 

Still, growing uncertainty over a stalemate in Washington in talks for a stimulus package to support recovery from the deepest impact of the pandemic may weigh on prices. 

In India, refined fuels consumption fell to 15.68 million tonnes in July, down 11.7% year-on-year and 3.5% below June's levels, data from the Petroleum Planning and Analysis Cell (PPAC) of the Ministry of Petroleum & Natural Gas showed. 

(Additional reporting by Aaron Sheldrick in TOKYO; Editing by Jan Harvey and Alexander Smith) ((Ahmad.Ghaddar@thomsonreuters.com; +442075424435; Reuters Messaging: ahmad.ghaddar.thomsonreuters.com@reuters.net))

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