By Ambar Warrick
Investing.com-- Oil prices rose further on Wednesday after data pointed to a large weekly drawdown in U.S. crude inventories, although concerns over waning Chinese demand and slowing global economic growth put markets on course for steep losses in November.
Data from the American Petroleum Institute showed that U.S. crude inventories shrank by a much bigger-than-expected 7.9 million in the past week, heralding a similar reading from government data due later in the day.
The figure indicates that the U.S. government has likely scaled back its drawdowns from the Strategic Petroleum Reserve, which is set to tighten supply in the country.
West Texas Intermediate crude futures - the U.S. oil benchmark - surged on this notion, rising 1% to $78.98 a barrel. London-traded Brent oil futures rose 1% to $85.10 a barrel by 22:08 ET (03:08 GMT).
Both contracts extended gains into a third consecutive session, as recent weakness in crude prices also drove speculation that the Organization of Petroleum Exporting Countries and its allies will further cut production when it meets on December 4.
The cartel had announced a 2 million barrel per day cut in October, which briefly pushed up oil prices, and could intervene once again to support the market.
But crude prices were set to lose between 8% and 11% in November, largely due to concerns over rising COVID-19 cases and increased economic disruptions in major importer China.
Data on Wednesday showed Chinese business activity slumped further in November, as the country grapples with a record-high daily increase in COVID-19 infections.
The world’s largest oil importer reintroduced lockdown measures in several economic hubs to combat rising cases. But this sparked an unprecedented wave of anti-government protests in the country, which threatened to further dent economic growth.
The civil unrest spurred some speculation that China will be forced into relaxing its strict zero-COVID policy - a move that is largely positive for oil markets.
While the Chinese government has given no such indication, health authorities announced moves to ramp up vaccination rates across the country - a move that could signal an eventual relaxing of curbs.
Weak economic indicators from the U.S. and other major economies also weighed on crude prices in November, as did signs of less severe Western price caps on Russian oil exports.