Oil prices rise on stronger economic outlook, US stockpile draw

Brent crude futures for June rose by 34 cents, or 0.5 per cent, to $63.08 a barrel

Oil futures inched higher on Wednesday on an improving global economic outlook, but gains were capped by rising gasoline inventories and fears that new coronavirus outbreaks will weaken a global recovery in fuel demand.

Brent crude futures settled at $63.16 a barrel, up 42 cents, or 0.7%. U.S. West Texas Intermediate crude settled at $59.77 a barrel, gaining 44 cents, or 0.7%.

U.S. crude stocks fell 3.5 million barrels last week, but gasoline inventories jumped 4 million barrels, the Energy Information Administration (EIA) said, compared with expectations in a Reuters poll for a 221,000-barrel gasoline drop.

"If you don’t need to make gasoline, then you don’t need to use more crude oil," said Bob Yawger, director of energy futures at Mizuho Securities.

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Prices drew support when the Federal Reserve released minutes from last month's meeting that reinforced the U.S. central bank's position that it will refrain from raising rates anytime soon, boosting the fuel demand outlook.

The International Monetary Fund on Tuesday said unprecedented public spending to fight COVID-19 would push global growth to 6% this year, a rate not achieved since the 1970s, which also helped the fuel demand outlook and supported prices.

However, rising Covid-19 cases in the Americas, which accounted for more than half of all coronavirus-related deaths last week, capped gains.

"There's concern globally with the rise in COVID-19 cases again and now Canada staring down a third wave, the market continues to be haunted by these demand issues from the outbreaks," said John Kilduff, partner at Again Capital in New York.

Also, global crude supplies could increase as Iran and major world powers took steps toward reviving an agreement that froze Iran's nuclear weapons development. The parties agreed to form working groups to discuss the possibility of reviving the 2015 deal that could lead to Washington lifting sanctions on Iran's energy sector.

"Iran is the single largest upside supply risk for the oil market," said Stephen Brennock of oil brokerage PVM.

Oil prices dropped earlier this week after the Organization of the Petroleum Exporting Countries (OPEC) and allies, a group known as OPEC+, agreed to gradually ease oil output cuts from May.