Oil rises over 3 percent as demand worries ease

Oil prices rose over 3% on Wednesday as China reported its lowest daily number of new coronavirus cases since late January, stoking investor hopes that fuel demand in the world's second-largest oil consumer may begin to recover.

Brent futures gained $1.78, or 3.3%, to settle at $55.79 per barrel, while US West Texas Intermediate (WTI) crude gained $1.23, or 2.5%, to settle at $51.17.

Those were the highest settles for both futures since January even though the US government reported a larger-than-expected weekly build in crude inventories that was countered by a decline in fuel stocks, including an unexpected gasoline drawdown.

Crude inventories rose 7.5 million barrels last week, the Energy Information Administration said, compared with analysts' expectations in a Reuters poll for a 3 million-barrel rise. "Gasoline demand is starting to rebound, and the modest drawdown in refined fuels helped to offset the bearish, blaring crude oil headline," said John Kilduff, a partner at Again Capital in New York.

US gasoline refining margins rose to their highest since August due to a sharp 4.4% increase in gasoline futures.

"Reports out of China indicating a reduction in the number of new virus cases forced additional accumulation across various asset classes today," Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, said in a report, noting the energy complex was also rising with new highs in the stock market.

Travel restrictions to and from China and quarantines have cut fuel usage. The two biggest Chinese refiners have said they will reduce their processing by about 940,000 barrels per day (bpd) as a result of the consumption drop, or about 7% of their 2019 processing runs.

The Organization of the Petroleum Exporting Countries (OPEC) cut its forecast for global growth in oil demand due to coronavirus by 230,000 bpd - a fairly modest assessment compared with other forecasters. The US government on Tuesday cut its growth forecast for this year by 310,000 bpd.