Oil prices climb as US crude supplies tumble in peak demand season

Oil advanced after declining US crude, gasoline and distillate stockpiles signaled healthy demand during the nation’s summer driving season.

 

Futures rose as much as 1.3 per cent in New York on Wednesday. A US government report showed crude supplies slid to the lowest since January 2020 and distillate stockpiles posted the biggest decline since April. Fuel inventories fell by more than 2 million barrels last week, the data showed.

 

US demand is “pretty healthy from an inventory perspective,” said Brian Kessens, a portfolio manager at Tortoise, a firm that manages roughly $8 billion in energy-related assets. While delta variant bears watching, “to date, it hasn’t had any impact on mobility at all” in the US, he said.

 

Global oil prices have rallied this year with an economic recovery underway following vaccine campaigns. However, the delta variant’s recent surge is posing a threat to the commodity’s rally — and short-term demand — as a rapidly rising case count has led many countries to impose restrictions.

 

“Pricing pressures have been temporarily put on hold amid the ongoing tug-of-war between delta variant concerns and expectations of crude deficits,” said Stephen Brennock, an analyst at PVM Oil Associates.

 

The EIA data also showed jet fuel demand rising in the US, with the moving average climbing to about 1.5 million barrels a day, the highest since March 2020. Inventories at the nation’s largest storage hub in Cushing, Oklahoma, slid to the lowest level in more than a year.

 

Meanwhile, returns from converting crude into gasoline have surged in recent weeks from the US to Asia, where they’ve hit the highest level since April 2019. However, the spread of the delta variant has presented a challenge to refiners ready to put the worst of the Covid-19 pandemic behind them. Processors want to cash in on better margins, but are wary that renewed demand weakness could lead to a surplus of fuels and sink profits again.