- API shows lower US crude stocks, higher fuel inventories
- Some optimism on China fuel demand, economic outlook evident
- OPEC+ virtual meeting signals potentially limited policy change
Oil prices firmed in Asian trade on Wednesday on falling US crude inventory figures from API, a lower greenback and some optimism on the outlook for China's demand and economy.
A high likelihood that OPEC+ would leave output unchanged at its upcoming meeting limited gains.
Brent crude futures LCOc1 had firmed 70 cents or 0.84% to $83.73 per barrel by 0732 GMT, while US West Texas Intermediate (WTI) crude CLc1 futures climbed 56 cents or 0.72% to $78.76 per barrel.
The market is still in a contango structure, with forward month futures trading higher than the prompt month futures.
Helping to boost prices, US crude oil stocks were expected to have dropped by about 7.9 million barrels in the week ended 25 November, according to market sources citing American Petroleum Institute figures on Tuesday.
Official figures are due from the US Energy Information Administration on Wednesday.
Optimistic sentiment in relation to China contributed to the uptrend in the Asian afternoon trade.
"China's weak PMI data may have been digested already as the recent reopening optimism overshadows the lagging economic data," said CMC market analyst Tina Teng, referring to the purchasing managers' index for November, issued earlier on Wednesday.
China also reportedfewer Covid-19 infections than on Tuesday, amid market speculation of weekend protests possibly prompting loosening in Covid-19 movement restrictions. Guangzhou, a southern city, relaxed Covid prevention rules in several districts on Wednesday.
With current lockdowns, real-time data indicates only a small downturn in traffic, with national traffic in the fourth week of November at 95% of 2019 levels, compared with 97% earlier in the month, according to Rystad Energy senior vice president Claudio Galimberti. That signalled better-than-expected fuel demand domestically.
Galimberti estimated that Brent would trade higher around $90 a barrel and WTI around $83 a barrel in the first half of December.
Asian shares also rebounded on Wednesday as investors pinned hopes on China eventually reopening its economy.
Slight support also came from a weaker US dollar. Fed Chair Jerome Powell is scheduled to speak about the economy and labour market at a Brookings Institution event on Wednesday, when investors will be looking for clues about when the Fed will slow the pace of its aggressive interest rate hikes.
"Energy markets are not properly pricing how resilient the global economy remains and this week we could see an upward revision with the US Q3 GDP reading," senior analyst Edward Moya at OANDA said in a client note.
Thin liquidity and an overall lack of trading volumes towards the year-end could also be propping up the market, according to Virendra Chauhan at Energy Aspects.
On the supply side, the OPEC+ decision to hold its 4 December meeting virtually signals little likelihood of a policy change, a source with direct knowledge of the matter told Reuters on Wednesday.
"Oil's rally ran out of steam after reports that OPEC+ might end up keeping their output steady. Expectations were growing for them to seriously consider an output cut," Moya added.