Oil settles near $75; sharp U.S. inventory drop counters virus worry

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NEW YORK — Oil settled near $75 a barrel on Wednesday after data showed U.S. crude inventories fell more sharply than analysts had forecast, bringing the market’s focus back to tight supplies rather than rising COVID-19 infections.

Crude inventories fell by 4.1 million barrels in the week to July 23, the U.S. Energy Information Administration said. Gasoline and distillate fuel stocks also dropped.

“A rebound in implied demand for both gasoline and distillates, as well as lower refinery runs, has encouraged decent inventory draws for both,” said Matt Smith, director of commodity research at ClipperData.

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Brent crude settled up 26 cents, or 0.4%, to $74.74 a barrel, after posting on Tuesday its first decline in six days. U.S. West Texas Intermediate (WTI) crude settled up 74 cents, or 1%, to $72.39.

Oil has risen 45% this year, helped by demand recovery and supply curbs by the Organization 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.

The U.S. economic recovery remains on track despite a rise in COVID-19 infections, the Federal Reserve said on Wednesday in a new policy statement that remained upbeat and flagged ongoing talks around the eventual withdrawal of monetary policy support. The central bank left interest rates at 0%.

However, a rising number of COVID-19 cases worldwide, despite vaccination programs, has limited the upside for oil and remains a concern. (Reporting by Laura Sanicola; Additional reporting by Alex Lawler in London, Sonali Paul in Melbourne and Koustav Samanta in Singapore; Editing by Carmel Crimmins, Will Dunham, Jason Neely, David Evans and David Gregorio)