Oil nears $75 as US inventory drop counters virus concerns

Oil rose towards $75 a barrel on Wednesday ahead of an industry report expected to show US crude inventories fell more than expected, bringing the focus back to a tight supply and demand balance rather than rising coronavirus infections.

US crude stocks fell 4.7 million barrels, two market sources citing American Petroleum Institute figures said, more than analysts forecast. Official US Energy Information Administration inventory figures are out at 1430 GMT.

"This price catalyst may inject some much-needed momentum into proceedings, especially after the API set a bullish tone," said Stephen Brennock of broker PVM, referring to the EIA report.

Brent crude rose $0.23, or 0.3%, to $74.71 a barrel at 1200 GMT, after posting on Tuesday its first decline in six days. US West Texas Intermediate (WTI) crude advanced $0.33, or 0.5%, to $71.98.

Oil has risen 44% this year, helped by demand recovery and supply curbs by the Organisation of the Petroleum Exporting Countries and allies, known as OPEC+.

OPEC+ agreed to increase supply by 400,000 barrels per day from August, unwinding more of last year's record supply cut, but this is seen as too low by some analysts given the rebound in demand expected this year.

"Oil supply is likely to remain tight even with the production hikes set by OPEC+," said Naeem Aslam of online broker Avatrade.

A rising number of coronavirus cases worldwide, despite vaccination programmes, has limited the upside for oil and remains a concern.  

As well as the EIA report, a statement from a US Federal Reserve policy meeting due at 1800 GMT will also be in focus. The dollar was firmer ahead of the meeting, which tends to weigh on oil as it makes crude more expensive for other currency holders.