Oil prices rose on Wednesday as U.S. crude stocks dipped, while Japan posted rising machinery orders, lending the market support amid an ongoing supply glut that could see the market run out of onshore crude storage sites in the first quarter of 2016.
U.S. West Texas Intermediate (WTI) crude futures were at $38.09 per barrel at 0802 GMT, up 58 cents from their last settlement. Internationally traded Brent futures were up 39 cents at $40.65 a barrel.
The firmer WTI prices were a result of a surprise 1.9-million-barrel fall in U.S. crude inventories to 488 million barrels last week. The drop, as estimated by industry group the American Petroleum Institute, compared with analysts’ expectations for an increase of 252,000 barrels.
Official figures from the U.S. Energy Information Administration (EIA) are due on Wednesday at 10:30 EST.
Traders said the recovery in Brent was largely a result of short covering, the surprise lift in Japanese machinery orders and Chinese tax reforms aimed at encouraging imports, including of energy-intensive machinery.
Yet analysts said there remained plenty of bearish factors that have helped pull down global commodity prices since 2014, including the strong dollar, weakening demand, soaring supplies and the unwinding of a quantitative easing premium, with the U.S. Federal Reserve expected to hike interest rates soon.