Oil rises on strong US fuel demand as supply concerns continue

A model of petrol pump and a rising stock graph are seen in this illustration taken Jan 15, 2024. REUTERS/Dado Ruvic/Illustration/file photo

Oil prices climbed in early trade on Thursday, supported by strong demand in the U.S. after gasoline stocks hit a three month low and crude stockpiles dropped unexpectedly, with supply concerns remaining after Ukrainian attacks on Russian refineries.

Brent futures for May climbed 11 cents, or 0.13 percent, to $84.14 a barrel at 0652 GMT, while April U.S. West Texas Intermediate (WTI) crude rose 10 cents, or 0.13 percent, to $79.82 per barrel.

Both contracts had risen about 3 percent to a four-month high on Wednesday on the elevated U.S. demand outlook and heightened geopolitical risk.

“Strong US products exports led gasoline stock to fall to a three-month low. Rising gasoline prices are supporting crack spread for refiners. Market also reacted to increasing geopolitical risks after a Ukrainian drone attacked a Russian refinery,” said ANZ analysts in a client note.

U.S. crude oil stockpiles

U.S. gasoline inventories slid for a sixth straight week, falling by 5.7 million barrels to 234.1 million barrels, the Energy Information Administration (EIA)said on Wednesday, triple the expectations for a 1.9 million-barrel draw.

Stocks of motor fuel at the U.S. Gulf Coast fell to their lowest since November 2022, while finished motor gasoline supplied, a proxy for demand, edged up 30,000 barrels per day to more than 9 million bpd for the first time this year.

U.S. crude oil stockpiles also fell unexpectedly as processing increased.

Supportive on the demand front, the U.S. bought around 3.25 million barrels of oil for the country’s Strategic Petroleum Reserve for August delivery.

Strikes on Russia’s refinery

Supply-wise, Ukrainian drone strikes on Russian refining facilities continued for a second day on Wednesday, causing a fire at Rosneft’s biggest refinery in one of the most serious attacks against Russia’s energy sector in recent months.

“The recent push-up in oil prices has been attributed to a tighter supply-side factor, and given next week’s risk event (the outcome of the Fed’s FOMC meeting on 20 March) we may see some consolidation at the US$80.55/81.65 per barrel resistance zone for WTI crude,” senior market analyst at OANDA Kelvin Wong said.

In Ryazan, a drone attack caused a fire at Rosneft’s refinery. Two sources familiar with the situation told Reuters that the refinery had been forced to shut down two primary oil refining units.