Oil prices rise on expected inventory drawdown; coronavirus concerns cap gains

Oil prices rose on Tuesday on expectations of a drawdown in crude oil inventories in the United States for a fifth straight week, but investor worries over climbing coronavirus cases globally capped price gains.

Brent crude oil futures climbed 22 cents, or 0.4%, to $55.88 a barrel by 0703 GMT, while US West Texas Intermediate (WTI) gained 25 cents, or 0.5%, to $52.50 a barrel.

"I think the market will be rapid to conclude that yesterday's modest pullback in price, provided the virus spread in China remains contained, was but a blip on the radar screen," Stephen Innes, chief global market strategist at Axi, said in a note, citing the prospect of increased economic stimulus in the United States.

US President-elect Joe Biden, who takes office on Jan. 20 with his Democratic party in control of both houses of Congress, has promised "trillions" in extra pandemic-relief spending.

US crude oil stockpiles likely fell for a fifth straight week, while refined products inventories were seen up last week, a preliminary Reuters poll showed on Monday.

The poll was conducted ahead of reports from industry group the American Petroleum Institute later on Tuesday and the Energy Information Administration (EIA), the statistical arm of the US Department of Energy, on Wednesday.

Brent could rise to $65 per barrel by summer 2021, Goldman Sachs said, driven by Saudi cuts and the implications of a shift in power to the Democrats in the United States. The Wall Street investment bank had previously predicted oil would hit $65 by year-end.

Worldwide coronavirus cases surpassed 90 million on Monday, according to a Reuters tally, as nations around the globe scramble to procure vaccines and continue to extend or reinstate lockdowns to fight new coronavirus variants.

In Asia, Japan is planning to widen a state of emergency beyond its capital Tokyo to stem the spread of Covid-19 while China is implementing movement curbs in some parts of the country.