Oil futures marked their highest settlement since March on Wednesday, boosted by an upbeat outlook for demand in the second half of 2021 and data showing a fall in U.S. crude inventories.
Traders also kept an eye on gasoline shortages across the U.S. Southeast as the Colonial Pipeline moves to restore service on a key fuel artery.
The International Energy Agency, in its monthly report, said the oil glut built up after the pandemic forced producing countries to slash output has almost returned to normal levels.
The IEA cut its 2021 forecast for demand growth, reflecting weaker-than-expected demand in the first half of the year. However, it left its outlook for the second half unchanged and said it expects global oil demand to have almost returned to its pre-pandemic normal level by the end of this year.
The report followed Organization of the Petroleum Exporting Countries’ monthly report released Tuesday, which left OPEC’s upbeat outlook for 2021 demand growth unchanged.
The mood in oil prices was bolstered by a very positive IEA report suggesting a “robust demand outlook” for all major consumers, including China and the U.S., said Manish Raj, chief financial officer at Velandera Energy. The U.S. demand picture “looks truly robust, with uptick in road traffic, hotel reservations and flight schedules all looking solid ahead of the Memorial Day weekend and summer travel season.”
The Energy Information Administration on Wednesday reported that over the past four weeks, motor gasoline product supplied, a proxy for demand, averaged 8.9 million barrels per day, up over 41% from the same time a year ago.
Against this backdrop, West Texas Intermediate crude for June delivery
rose 80 cents, or 1.2%, to settle at $66.08 a barrel on the New York Mercantile Exchange. That was the highest front-month contract finish since March, according to Dow Jones market Data.
On a technical trading basis, prices for the U.S. benchmark have seen resistance at the $67 level so a close above that mark would be “bullish resolution to the consolidation and…open the door for an advance to 2018 highs near $75,” said Dan Russia, portfolio manager at Potomac Fund Management.
July Brent crude
the global benchmark, added 77 cents, or 1.1%, at $69.32 a barrel on ICE Futures Europe, also the highest finish since March.
The EIA Wednesday reported that U.S. crude inventories edged lower by 400,000 barrels for the week ended May 7. That was less than the average decline of 4.1 million barrels forecast by analysts polled by S&P Global Platts. The American Petroleum Institute on Tuesday reported a 2.5 million-barrel decrease.
The EIA data also showed crude stocks at the Cushing, Okla., storage hub down by 400,000 barrels for the week, though total domestic petroleum production rose by 100,000 barrels to 11 million barrels per day.
Gasoline supply rose by 400,000 barrels, while distillate stockpiles fell 1.7 million barrels for the week, the report said. The S&P Global Platts survey had expected a weekly supply climb of 700,000 barrels for gasoline and 2 million-barrel decline for distillates.
At the retail level, the average price for regular unleaded gasoline climbed to $3.015 a gallon as of Wednesday afternoon, up from $2.945 a week ago, topping the $3 mark for the first time since 2014, according to GasBuddy.
Logistical snags created by the shutdown of the Colonial Pipeline, which provides around 45% of fuel needs to the U.S. East Coast, remained on the radar.
A growing number of gas stations in the Southeast have ran out of gasoline. Around 71% of stations in metro Charlotte and 60% of stations in metro Atlanta were out of gasoline as of Wednesday morning, said Patrick de Haan, analyst at fuel-price-tracking service GasBuddy, via Twitter.
“While a prolonged outage would be supportive for refined product prices, it could start to weigh on crude oil prices, if refiners on the U.S. Gulf Coast are forced to reduce run rates due to a build-up of refined product inventories,” said Warren Patterson, head of commodities strategy at ING, in a note.
However, Velandera Energy’s Raj said the gasoline demand spikes due to the pipeline shutdown is “just noise, since temporary dislocations such as this impact neither oil production nor demand in the long run.”
Also on Nymex, June natural gas
added 0.5% to nearly $2.97 per million British thermal units, ahead of Thursday’s EIA update on weekly U.S. supplies of the fuel.