Oil up as US stocks drop, positive OPEC outlook signals demand rebound

Oil prices increased on Wednesday on the back of oil demand recovery hopes induced by an estimated drop in US crude oil inventories and positive outlook of OPEC for the rest of the year.

International benchmark Brent crude was trading at $68.88 per barrel at 0653 GMT for a 0.48% increase after closing Tuesday at $68.55 a barrel.

American benchmark West Texas Intermediate (WTI) was at $65.60 per barrel at the same time for a 0.49% increase after it ended the previous session at $65.28 a barrel.

Late Tuesday, the American Petroleum Institute (API) announced its estimate of a fall of 2.5 million barrels in US crude oil inventories relative to the market expectation of a draw of 2.2 million barrels.

The forecast of a larger inventory draw signals a recovery in crude demand in the US, easing investor concerns about declining demand, which, in turn, supports higher prices.

The US Energy Information Administration (EIA) will release official oil stock data later on Wednesday. Oil prices are expected to continue rising if the EIA signals a drop in stocks.

A strong oil demand recovery forecast from OPEC in the second half of the year also exerted upward oil price pressure.

Revising up its global oil demand by around 6% to an average of 96.5 million barrels per day (bpd) in 2021, OPEC said in its Monthly Oil Market Report that positive transportation fuel data from the US, and acceleration in vaccination programs in many regions provides further optimism in the second half of 2021.

It said that the assumed return to some degree of normality and improved mobility is also expected to positively affect regions such as the Middle East and other Asia during the same period.

Oil prices further supported by the reports about a shortage of gasoline, especially in the southeast states of the US after the temporary closure of the country’s largest oil pipeline, Colonial Pipeline, which was the victim of a cybersecurity attack on Friday.

While the gasoline shortages affected hundreds of gas stations, it was also reported that stations stopped their operations in some states.

Gasoline supplies started to run out and gasoline prices began to rise in almost all states from Virginia to Florida.

The shortages sparked panic and drivers in these areas bought more gas than they needed, causing supplies to rapidly deplete.

According to the gas-pricing website GasBuddy, demand in the five states served by the pipeline increased by 40% on Monday.

Governors Ron DeSantis of Florida and Ralph Northam of Virginia issued state of emergency due to fuel shortages.

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