Oil up above $56 on lower U.S. stockpiles, drop in new Chinese COVID-19 cases

Brent crude futures climbed 39 cents, or 0.7%, to $56.30 a barrel

French oil giant Total Refinery is seen during sunset in Donges, France, November 30, 2020.

French oil giant Total Refinery is seen during sunset in Donges, France, November 30, 2020.

REUTERS/Stephane Mahe

LONDON- Oil held close to $56 a barrel on Wednesday as industry data showing U.S. crude inventories fell unexpectedly balanced persistent concerns about demand as coronavirus cases top 100 million globally.

Industry group the American Petroleum Institute (API) said U.S. crude inventories fell by 5.3 million barrels. Analysts had expected them to rise. Official inventory figures are due at 1530 GMT from the Energy Information Administration. 

Brent crude slipped 4 cents to $55.87 a barrel by 1301 GMT, giving up an earlier gain. U.S. West Texas Intermediate (WTI) crude rose 6 cents to $52.67.

"Demand concerns should remain with us for some time," said Eugen Weinberg of Commerzbank. "And yet the market currently appears determined to embrace the positive news instead."

Brent on Jan. 13 hit an 11-month high of $57.42, having recovered from a 21-year low below $16 in April due to a demand recovery particularly in China and huge supply cuts by OPEC and its allies, known as OPEC+.

"Oil continues consolidating," said Jeffrey Halley of brokerage OANDA. "The Saudi Arabian cuts, OPEC+ compliance above 85% and an insatiable demand from Asia means that oil has seen its cyclical lows for 2021."

In focus later on Wednesday will be the results of the U.S. Federal Reserve's two-day policy meeting. Analysts expect the central bank to stick to its dovish tone to help speed the economic recovery. 

Still, the number of global coronavirus cases has surpassed 100 million as infections rise in Europe and the Americas, and Asia scrambles to contain fresh outbreaks.

China, the second-largest oil consumer, has recently seen a coronavirus resurgence, but official Chinese data showed 75 new confirmed cases of COVID-19 on Wednesday, the lowest daily rise since Jan. 11. 

This eased concern of a sharp drop in travel that threatened a new hit to demand over the Lunar New Year, when hundreds of millions typically make journeys.

(Additional reporting by Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; editing by David Evans and Jason Neely) ((alex.lawler@thomsonreuters.com; +44 207 542 4087; Reuters Messaging: alex.lawler.reuters.com@reuters.net))

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