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Crude oil futures pull off lows, though US stock build caps gains

Crude oil futures were trading higher in late-morning Europe July 21, pulling off a small dip earlier in the day on the back of a surprise US inventory build, but still a way off recovery from the huge delta variant-driven selloff at the start of the week.

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At 1020 GMT, ICE September Brent futures was up 76 cents/b at $70.11/b while the new-front month NYMEX September WTI contract was 73 cents/b higher at $67.93/b.

The rise was partly due to "buyers sensing an opportunity after the selloff," according to one analyst, who added that the rollover of the front-month August WTI futures contract to September was increasing the volatility.

Though oil and equities fell together July 19 in a mass selloff amid the growing delta coronavirus variant fears, the recovery in equities that followed has not yet been fully replicated in oil as residual demand concerns weighed on the outlook, according to analysts.

Assessing the outlook, market watchers considered rising OPEC+ supply against expectations that an increase in demand could be threatened by higher infection levels.

"The rise in Delta variant cases is raising questions about the sustainability of demand. As things stand, it is hard to see prices staging a comeback unless virus jitters are brought back under control," brokerage agency PVM wrote in a note.

A surprise expected build in US crude inventories by the American Petroleum Institute had sent prices lower earlier in the day. Analysts had expected consistent draws in US stocks as the increase in refinery runs has outpaced supply and inventories are at low levels historically.

US crude inventories rose 806,000 barrels in the week ended July 16, with gasoline stockpiles also rising 3.32 million barrels in the same period, according to the API data.

The build was "very different from the roughly 4.5 million-barrel drawdown the market was expecting," ING analysts said in a note. If confirmed, that would be the first crude stock build since mid-May, they added.

Participants will look ahead to definitive numbers from the US Energy Administration, due later in the day.