Oil climbs, but gains capped by weak demand

Oil prices rose on Thursday, but an unexpected build in U.S. crude oil reserves capped gains as the coronavirus pandemic curbed fuel consumption.

U.S. crude and distillate stocks rose while fuel demand fell in the past week as a continuous surge of coronavirus cases hit U.S. consumption.

Brent crude grew 0.1%, or 2 cents, to $44.31 per barrel. U.S. West Texas Intermediate crude rose 0.1%, or 6 cents, to $41.96 per barrel. 

U.S. crude inventories increased by 4.9 million barrels to 536.6 million barrels in the week ended July 17, contrary to analysts’ expectations of a 2.1 million-barrel drop. Output rose to 11.1 million bpd, up by 100,000 bpd.

A fresh conflict between the United States and China also weighed on the prices. Washington allocated 72 hours for China to close its consulate in Houston due to spying allegations, further worsening the tensions between the two countries.

Adding to the pressure was Japan’s economic data showing that factory activity fell for the 15th month in July. Meanwhile, investors are awaiting the EU’s consumer confidence data due later today.