Meanwhile, analysts assess China oil auction's impact on market sentiment: File Image/Pixabay
Tropical Storm Nicolas, which caused oil price gains in earlier sessions, was eclipsed on Wednesday by positive sentiment stemming from a massive stockpile drawdown in the U.S. and the notion that the Delta variant infections will soon abate and give way to demand resurgence.
After the American Petroleum Institute disclosed that crude stocks fell by 5.4 million barrels for the week ended on September 10 compared to expectations of a 3.5 million barrel drop, West Texas Intermediate climbed 44 cents to $70.90 per barrel.
Brent rose 39 cents to $73.99 per barrel by 0133 GMT.
Matt Sallee, president, Tortoise
Covid demand worries are taking a backseat for now
Trading was also bolstered by the fact that although Nicolas is causing flooding and power outages in Texas and Louisiana, Texas refineries continued to run normally.
Additionally, skittish traders basked in the aftermath of an earlier International Energy Agency report stating that increase vaccination rates worldwide are set to power a demand rebound; this coincided with the World Health Organization reporting a major drop in Covid cases last week, the first in over two months.
Matt Sallee, president at Tortoise, remarked, "There's not a lot of new crude supply coming to the market, so the market feels awfully tight [and] that will keep crude prices moving higher.
"Covid demand worries are taking a backseat for now."
Also on Wednesday, analysts pointed out that the impending oil reserve auction in China, however minuscule compared to world daily consumption, may have a huge impact on market sentiment.
Michal Meidan, director for China at the Oxford Institute of Energy Studies, said, "I see it very much a test, both in terms of internal mechanism and the impact on market ... for containing inflation and ... learning how to use the SPR like the U.S. does."
Tony Nunan, senior risk manager at Mitsubishi Corp., suggested that the timing of the sale - just as global oil prices hover near $75 per barrel - indicates Beijing hopes to guide oil costs lower: "The Chinese have the most power to do that now because they are the No. 1 importer of crude oil."