By Adedapo Adesanya
The Brent crude began the new month on a positive note after trading higher at $42 per barrel on Wednesday at the global market.
This improvement came after energy report showed that crude inventories in the world’s largest economy, the United States, plunged more than expected.
Consequently, the international crude benchmark gained 1.87 percent or 77 cents to trade at $42.04 per barrel, while the US West Texas Intermediate (WTI) crude was up 1.4 percent or 55 cents to trade at $39.82 per barrel.
The Energy Information Administration (EIA) reported on Wednesday that US crude inventories fell by 7.2 million barrels for the week ended June 26. This followed three consecutive weeks of increases which pressured the market.
Analysts forecast an average crude supply decline of 2.7 million barrels, while another industry group, the American Petroleum Institute (API) reported a fall of 8.2 million barrels.
The contraction in US inventories renewed investors confidence and optimism in crude markets, which have been tackled recently by anxieties around the growing spread of COVID-19 and the impact of this on crude demand.
The novel virus continues to spread around the world with ever-increasing rates of infection with more than 10 million cases and more than half a million people already dead.
However, this did not stop the market as oil prices registered their best quarterly performance in 30 years during the three months through to the end of June, staging a dramatic comeback after falling to record lows in April.
Brent crude futures skyrocketed more than 80 percent in the second quarter. It was the international benchmark’s best quarterly performance since the third quarter of 1990, when it registered gains of 142 percent during the first Gulf War.
US WTI futures surged 91 percent in the three months through to end of June, also reflecting the best quarterly performance for U.S. crude since the third quarter of 1990 when it soared 131 percent.
However, despite notching extraordinary gains in recent weeks, both Brent and WTI futures are still down over 34 percent since the start of the year.
The prospects of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, easing record production cuts from August is another factor that continues to gains cap as production ceiling will decrease to 7.7 million barrels daily from August.
Analysts note that concerns with demand-side factors such as COVID-19 and risks over another round of lockdowns are likely to remain.
Modupe Gbadeyanka