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Oil prices slip below $56 on coronavirus and demand concerns, ahead of supply report

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Oil slipped further below $56 a barrel on Wednesday as persistent concerns about demand countered industry data showing US crude inventories fell unexpectedly.

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The American Petroleum Institute (API) said on Tuesday that US crude inventories fell by 5.3 million barrels. Analysts expect them to rise in a Reuters poll ahead of official inventory figures due at 1530 GMT.

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Brent crude slipped 37 cents or 0.7 percent to $55.54 a barrel by 1447 GMT, giving up an earlier gain. US West Texas Intermediate (WTI) crude fell 31 cents to $52.30.

“Demand concerns should remain with us for some time,” Eugen Weinberg of Commerzbank said.

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Brent on January 13 hit an 11-month high of $57.42, having recovered from a 21-year low below $16 in April due to a demand recovery particularly in China and huge supply cuts by OPEC and its allies, known as OPEC+.

“Oil continues consolidating,” said Jeffrey Halley of brokerage OANDA. “The Saudi Arabian cuts, OPEC+ compliance above 85 percent and an insatiable demand from Asia means that oil has seen its cyclical lows for 2021.”

As well as the inventory report, in focus later on Wednesday will be the results of the US Federal Reserve’s two-day policy meeting. Analysts expect the Fed to stick to its dovish tone to help speed the economic recovery.

Still, the number of global coronavirus cases has surpassed 100 million as infections rise in Europe and the Americas, and Asia scrambles to contain fresh outbreaks.

China, the second-largest oil consumer, has recently seen a coronavirus resurgence, but official Chinese data showed 75 new confirmed cases of COVID-19 on Wednesday, the lowest daily rise since January 11.