Oil holds steady as virus concerns weigh on demand hopes

Oil holds steady as virus concerns weigh on demand hopes

West Texas Intermediate Crude oil futures for September ended up $0.23 or about 0.6% at $41.27 a barrel.

Oil prices edged up on Wednesday after a steep drop in USA crude inventories, but another record day for COVID-19 cases worldwide kept gains in check.

Crude oil prices moved higher on Wednesday after official data showed a much larger than expected decline in USA crude inventories in the week ended July 24.

US crude gained 26 cents, or 0.6%, to $40.18 after dropping 3.3% in the previous session, also off lows not seen since July 10.

On the data front, USA crude oil inventories dropped by 10.6 million barrels to 526 million barrels last week, the IEA reported.

Brent crude's three-month timespread has been more than $1 a barrel in contango - where near-dated contracts are cheaper than later-dated ones - for five sessions.

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The government also urged anyone celebrating Eid al-Adha this weekend to "follow the new rules and protect the ones they love". We know that employers have gone to huge lengths to make workplaces safe, so that guidance remains unchanged.

"Despite the resilient and range-bound nature of oil pricing over recent weeks, plateauing global demand and increasing OPEC+ output raises the question of whether the market can absorb additional barrels", RBC Capital Markets said in a note.

Bjornar Tonhaugen, head of oil markets at Oslo-based Rystad Energy, said traders will next week closely monitor oil output increases by the Organization of the Petroleum Exporting Countries (OPEC) and its allies.

The raging COVID-19 pandemic is keeping alive concerns about falling fuel demand causing an oversupplied market as record numbers of infections are reported globally, including the USA, the world's biggest consumer of oil.

"The recent resurgence of the coronavirus is an ominous sign that the upside is limited in the immediate future", Tamas Varga of oil brokerage PVM said.

In coronavirus news, several USA states in the South and West reported their biggest one-day increase in coronavirus deaths Tuesday, fueling a bitter debate over the reopening of schools in the coming weeks. Saudi Arabia is expected to cut its official prices to Asian customers for the first time in four months, according to a Bloomberg survey, amid faltering demand.

Attempts to provide relief amid the outbreak were in disarray as Republicans in the US disagreed over their own plan for providing $1 trillion in new coronavirus aid on Tuesday.

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