Oil prices on Wednesday consolidated strong overnight gains as a bullish outlook for US fuel demand outweighed concerns about mobility curbs in Asia with the spread of the highly infectious Covid-19 Delta variant.
Industry data showed US crude oil and gasoline inventories fell last week, while the US Energy Information Administration raised its forecast for fuel demand in 2021 and said consumption in May through July was higher than expected.
US West Texas Intermediate (WTI) crude futures rose 6 cents, or 0.1 per cent, to $68.35 a barrel at 0136 GMT, adding to a 2.7 per cent jump on Tuesday.
Brent crude futures inched up 3 cents to $70.66 a barrel, following a 2.3 per cent gain from Tuesday.
"Oil prices rose on hopes that oil demand growth will outpace supply growth despite the spread of the highly transmissible Delta variant of Covid-19," Commonwealth Bank commodity analyst Vivek Dhar said in a note.
Data from the American Petroleum Institute showed US crude stocks fell by 816,00 barrels and gasoline stocks fell by 1.1 million barrels in the week ended August 6, according to two market sources. Both drawdowns were a bit smaller than analysts polled by Reuters had expected.
Weekly figures from the EIA are due on Wednesday.
The EIA's monthly report showed that the need for supply from the Organisation of the Petroleum Exporting Countries(OPEC) will exceed OPEC supply by 1 million barrels per day in the third quarter and by 300,000 bpd in the fourth quarter of 2021, CBA's Dhar said.
"With OECD commercial crude oil stockpiles having dropped back to pre-Covid levels already, a tightening oil market outlook will likely amplify oil price gains," he said.
Analysts remain wary, however, about the latest Covid-19 outbreak in China, which could still dent demand.
"China's COVID-zero strategy has seen mobility drop sharply. Sinopec, the nation's biggest refiner, said it was cutting runrates at some plants by 5–10 per cent amid weak demand," ANZ research said.