Oil prices edged higher on Thursday, although gains were capped by a surprise build in U.S. crude oil inventories, while a persistent surge in new coronavirus cases continued to dampen a recovery in fuel demand.
U.S. crude and distillate inventories rose unexpectedly and fuel demand slipped in the most recent week, the Energy Information Administration said on Wednesday, as a sharp rise in coronavirus cases starts to hit U.S. consumption.
Brent crude LCOc1 rose 7 cents, or 0.2%, to $44.36 a barrel by 0545 GMT while U.S. West Texas Intermediate (WTI) crude CLc1 gained 8 cents, or 0.2%, to $41.98 a barrel.
Prices have been marking time since hitting a four-month high earlier in the week on hopeful news about a coronavirus vaccine.
“Normally inventories of fuel would be heavily drawn upon, but the surge in COVID-19 case numbers has stymied the recovery,” ANZ said, referring to usual demand during the peak U.S. summer driving season.
The United States reported more than 1,000 deaths from COVID-19 on Tuesday, according to a NYK Daily tally, marking the first time since June 10 the nation has surpassed that grim milestone.
Crude inventories USOILC=ECI rose by 4.9 million barrels in the week to July 17 to 536.6 million barrels, compared with expectations for a 2.1 million-barrel drop.
“The crude market is astonishingly quiet with the EIA surprise inventories build and tensions between trading giants U.S. and China escalating,” said Avtar Sandu, commodities manager at Phillip Futures.
The United States have given China 72 hours to close its consulate in Houston amid accusations of spying, marking a dramatic deterioration in relations between the world’s two biggest economies.
But some analysts believe the fresh dispute between Washington and Beijing would not likely impact markets to a greater extent.
“Geopolitical concerns have been set aside with energy markets sensing that a new U.S.-China trade war, derailing the global recovery, an unlikely outcome,” said Jeffrey Halley, a senior market analyst at OANDA.
“Unless China surprises, we expect the rally to restart in European hours.”
Weak economic data from Japan, the world’s fourth-largest oil consumer, also weighed on prices.
The oil market is likely to take direction from consumer confidence data expected from Europe later in the day.