West Texas Intermediate futures surpassed $111 a barrel after data on Wednesday showed crude inventories at the storage hub in Cushing, Oklahoma, slumped to the lowest since March, and that motor fuel supplies declined to the lowest seasonal level since 2014. Global crude markets have been tightened by a combination of rebounding demand and disruption to Russian supplies.
“The fundamental backdrop is getting price supportive as the driving season is approaching,” said Tamas Varga, an analyst at brokers PVM Oil Associates Ltd. in London. “The summer might be hot — and not just temperature-wise.”
American retail gasoline prices have repeatedly broken records in the run-up to the driving season that starts this weekend. However, motor fuel demand is showing some signs of stress, tumbling on a rolling four-week basis, data released Wednesday by the Energy Information Administration show.
Crude has seen a tumultuous period of trading since the end of February after Russia’s invasion of Ukraine upended trade flows and fanned inflation, while Covid-19 outbreaks in China have damped demand in the biggest importer. Oil markets are balanced but companies need to invest more in production to meet rising demand and prevent even higher volatility, according to Saudi Aramco.
Crude stockpiles at Cushing dropped by 1.06 million barrels last week to 24.78 million barrels, while nationwide inventories fell for a second week, the EIA said. Gasoline storage levels dropped by 482,000 barrels. Gulf Coast refiners are running at the highest rate since January 2020.
“Supplies for both crude and fuels are tight, and demand — especially from the west — is robust, and that’s likely to push up prices for the next month or two,” said Will Sungchil Yun, senior commodities analyst at VI Investment Corp. “However, there are still concerns about a slowdown in the global economy.”
Chinese Premier Li Keqiang said the nation’s economy is in some respects faring worse than in 2020 when the pandemic first emerged, urging efforts to reduce a soaring unemployment rate. Strict lockdowns to curb the spread of the virus have strained economic activity and sapped fuel demand.