Oil rises on positive news from COVID-19 drug studyOil rises on positive news from COVID-19 drug study
FILE PHOTO: Pump jacks operate at sunset in Midland

By Bozorgmehr Sharafedin

LONDON (Reuters) – Oil rose on Wednesday on hopes for economic recovery and for a clinical trial showing a cheap steroid could help save some critically ill coronavirus patients but fears of a second wave of the virus curbed gains.

Brent crude <LCOc1> was up 29 cents, or 0.7%, at $41.25 a barrel at 0825 GMT. U.S. West Texas Intermediate (WTI) <CLc1> rose 17 cents, or 0.4%, to $38.55 a barrel.

The World Health Organization (WHO) said it was moving to update its guidelines after results showed the corticosteroid medication dexamethasone cut death rates by around a third among the most severely ill COVID-19 patients.

Yet concerns persist about the spread of the virus in some regions and the risk of second waves where the spread is slowing.

“We think the oil market is not currently pricing in a significant probability of either second waves of coronavirus cases in key consumers and the associated lockdowns, or anything less than a rapid return to economic business-as-usual,” Standard Chartered analysts said, pointing to a downside risk for prices in the medium term.

Beijing ramped up efforts to contain the coronavirus outbreak that has fanned fears of wider contagion, and scores of flights to and from the Chinese capital were cancelled and schools shut.

Both benchmarks rose more than 3% on Tuesday, after the International Energy Agency (IEA) raised its 2020 oil demand forecast to 91.7 million barrels per day (bpd) and U.S. retail sales posted a record jump in May.

The rise in U.S. crude and fuel inventories, however, stoked concerns about a surplus and pressured oil prices, as the number of coronavirus infections surpassed 8 million globally and several U.S. states saw a spike in new cases.

Official data from the U.S. Department of Energy’s Energy Information Administration is due on Wednesday. [EIA/S]

A panel led by the Organization of the Petroleum Exporting Countries (OPEC) will meet on Thursday to further discuss ways to strengthen and review compliance with producers’ output cut promises.

Iraq has reduced its oil exports by 8%, or 300,000 bpd, so far in June, according to shipping data and industry sources, indicating OPEC’s second-largest producer is stepping up efforts to adhere to its pledges.

(Reporting by Bozorgmehr Sharafedin in London, additional reporting Jane Chung in Seoul)