Crude oil prices were up at trade opening on Wednesday with optimism that the $2 trillion aid package to stimulate the American economy would increase crude demand in the world's largest oil consuming country.
U.S. crude touched a high of $25.10 a barrel early in the session and was at $24.61 a barrel, up 60 cents, or 2.5 per cent, by 1243 GMT.
API estimated a surprise draw of 1.247 million barrels in the US crude oil inventory for the week ending March 21, with a build of 2.774 million barrels.More news: Ian Lipkin, Medical Consultant on 'Contagion,' Tests Positive for Coronavirus
But some analysts struck a note of caution, as demand continues to decrease with more countries imposing lockdowns to curb the spread of COVID-19 while Saudi Arabia and Russian Federation are also no closer to ending their price war.
The available SPR storage is less than 80 million barrels, according to Department of Energy data, and would amount to a flow of less than 0.5 million bpd when filled over a period of six months, compared with nearly 10 million barrels of projected oversupply over the second quarter, it added.
Distillate inventories were also down, by 1.90 million barrels for the week. Inventories, which have risen for nine straight weeks, are expected to keep growing as fuel demand declines and refineries pare back activity.More news: Number of COVID-19 cases among Amazon workers rises
Analysts remain pessimistic that oil prices will stage an extended recovery amid the worsening pandemic and the ongoing oil price war between Saudi Arabia and Russian Federation. The Dallas Fed said its business activity index plunged from -4.2 in the fourth quarter to -50.9 in the first, the lowest reading in the survey?s four-year history. Senior Democrats and Republicans said on Tuesday they were close to a deal on a US$ 2 trillion stimulus package.
Oil prices have fallen by more than 45% this month after the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russian Federation, a grouping known as OPEC+, failed to agree on extending output cuts beyond March 31.
"The extreme imbalance between supply and demand due to the travel restrictions has only just began to unfold in the physical markets, and the true impact will be felt in the coming weeks", said Rystad Energy's head of oil markets, Bjornar Tonhaugen, in a note.More news: Tokyo postponement has 'no impact' on Paris 2024 Olympics, says organiser