Oil extends gain on decline in U.S. inventories, Bonny Light adds 74 cents 

Oil prices climbed further on Thursday, cancelling losses recorded early in the session as a steep fall in crude stockpiles overrode fears that an upsurge in U.S. coronavirus cases and re-imposed lockdown measures in California could hinder fuel demand recovery.

U.S. West Texas Intermediate (WTI) crude futures appreciated by 23 cents or 0.58% to $40.05 per barrel at 10:24 West Africa Time, extending the 1.4% gain posted on Wednesday.

Brent crude futures advanced by 25 cents 0r 0.59% to $42.28 a barrel, following an improvement of 1.8% at the last session.

Nigeria’s premium oil grade, Bonny Light had added 74 cents or 1.78% to close at $42.36 per barrel on Wednesday but another key national grade, Qua Iboe, dipped by 1 cent or 0.02% to $41.62 on the same day.

According to U.S. Energy Information Administration data, U.S. crude stocks tumbled by 7.2 million barrels from an unprecedented high last week, surpassing experts’ expectation, as refiners expanded production and imports relaxed.

Jeffrey Halley of OANDA stated in a note that the fall in inventories coupled with reports of oil flowing out of floating storage and a better manufacturing PMI data around the world formed a strong basis for increase in oil prices.

“The overnight price action and EIA data have temporarily lifted the COVID-19 gloom that has capped oil prices all week,” Halley said.

Experts also observed that gasoline stockpiles were higher contrary to predictions of a decline.

“Counter-seasonal builds in gasoline inventories as stockpiles unexpectedly rose are not precisely a bullish delight.

Read also: Oil prices advance on signs of economic rebound, Bonny Light up by 0.87%

“The EIA data showed that gasoline imports hit the highest level since last August and peaked the most on a seasonal basis in nine years,” AxiCorp strategist Stephen Innes said in a note.

U.S. coronavirus infections leapt by roughly 50,000 on Wednesday according to a Reuters tally, marking the highest single day rise since the pandemic broke out.

Experts noted anxieties about the uptick in cases in the densely populated sun belt states in the U.S, which rank among the country’s largest users of gasoline.

California cancelled earlier plans to reopen its economy, prohibiting indoor restaurant dining in most parts of the state, shutting bars and intensifying enforcement of social distancing and other measures.

Attention will now shift to driving activity in the United States over the forthcoming 4th July holiday and how U.S. oil producers will revive shut-in production quickly, analysts said.

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