MELBOURNE (Reuters) – Oil prices inched up in early trading on Thursday after sliding more than 5% in the previous session on worries that a rapid rise in COVID-19 cases could choke a revival in fuel demand, but volumes were thin with China out on a public holiday.
U.S. West Texas Intermediate (WTI) crude futures rose 12 cents, or 0.3%, to $38.13 at 0129 GMT after dropping $2.36 on Wednesday.
Brent crude futures climbed 5 cents, or 0.1%, to $40.36, after falling $2.32 on Wednesday. A day earlier, the benchmark contract hit its highest price since early March, just before pandemic lockdowns and a Saudi-Russian price war slammed markets.
Wednesday’s selloff came after U.S. government data showed crude stockpiles rose by 1.4 million barrels, driving inventories to a record high for a third straight week last week.
However analysts said that was mostly due to a flotilla of Saudi cargoes booked by U.S. refiners when prices slumped in March. Those shipments are due to ease soon.
On the positive side, the U.S. data showed a healthy increase in implied demand for gasoline, said National Australia Bank’s head of commodity research, Lachlan Shaw.
Gasoline supplied, a proxy for demand, jumped by 9% from the previous week, and U.S. gasoline stocks fell by 1.7 million barrels, the Energy Information Administration said, a bigger draw than analysts had expected.
However worries about a second wave of COVID-19 cases in several U.S. states, where lockdowns had eased, and a rapid spread of infections in South America and South Asia are expected to keep a lid on fuel demand.
The fear is that even if lockdowns are eased, people will stay home because of the perceived health risks.
“The latest trends there are not encouraging,” Shaw said.
Stephen Innes, market strategist at AxiCorp, said mobility data from Google showed driving in Texas, Florida and to a certain extent California was flatlining.
In another reminder of fuel demand woes, Australia’s flagship airline, Qantas Airways, said on Thursday it expected little revival in international travel until at least July 2021, as it slashed a fifth of its workforce and grounded 100 planes.
“It highlights the reality that we’re talking years before international aviation recovers — probably three to four years,” Shaw said.
(Reporting by Sonali Paul; editing by Richard Pullin)
