Oil futures remained higher Wednesday as an unexpected fall in U.S. gasoline inventories offset a rise in crude stocks. and traders monitored the threat of a strike by Norwegian offshore workers.
West Texas Intermediate crude for July delivery
rose $1.80, or 1.5%, to $121.21 a barrel on the New York Mercantile Exchange after closing at a nearly three-month high on Tuesday.
July natural gas
jumped 3.2% at $9.592 per million British thermal units.
The Energy Information Administration on Wednesday said U.S. crude inventories fell 2 million barrels in the week ended June 3, while gasoline stocks fell 800,000 barrels and distillate inventories rose 2.6 million barrels. Analysts surveyed by S&P Global Commodity Insights had looked for crude inventories to fall by 2.9 million barrels, while gasoline stocks were seen up 2 million barrels and distillate stocks up by 800,000 barrels.
“A jump higher in refining activity and strong East Coast imports could not avert a draw to gasoline inventories as implied demand jumped to the highest weekly level this year,” said Matt Smith, lead oil analyst, Americas, at Kpler.
That demand comes with gasoline prices hitting records at the pump and trading near all-time highs in the futures market.
Gasoline inventories on the East Coast saw a much-needed build, Smith said, as imports came in above 1 million barrels a day for the first time since the peak of summer driving season last July. Distillate inventories, meanwhile, rose amid higher refinery runs and lower implied demand.
The American Petroleum Institute, an industry trade group, late Tuesday had reported a 1.85 million barrel rise in crude stocks, a 1.82 million barrel increase in gasoline stocks, and a 3.38 million barrel jump in distillates, according to a source.
The crack spread — the difference between the price of a barrel of oil and the products that can be refined from it — narrowed on Tuesday, possibly reflecting the API data, noted Carsten Fritsch, commodity analyst at Commerzbank, but remains near record levels.
He noted that the so-called 3-2-1 crack spread, which indicates how much revenue is generated for U.S. refineries converting 3 barrels of WTI into 2 barrels of gasoline and 1 barrel of diesel, was at $56.50 a barrel after hitting a record $62.50 at the beginning of this week.
Jeremy Weir, chief executive of Trafigura, one of the world’s largest commodity-trading houses, warned at a Financial Times event Tuesday that crude prices were likely to hit $150 a barrel and could go “parabolic,” posing a threat to the global economic outlook.
Oil was also finding support from the potential for a strike by Norwegian offshore oil workers next week, Fritsch said, noting that Norway is the most important European oil and gas producer outside Russia.
A strike by 845 of Norway’s 7,500 offshore oil and gas workers beginning Sunday would have a limited effect on oil output, while natural-gas output would be unaffected in sensitivity to the situation in Europe as a result of the Russia-Ukraine war, labor unions said, according to Reuters.
Natural gas, which closed at a nearly 14-year high earlier this week, was back on the rise.
“Weather remains the key driver for this week’s bullishness as forecasts show hotter-than-normal conditions across the South, Midwest, and Rockies through the end of the month, which is likely to lift gas demand for power generation purposes,” said Christin Kelley, senior commodity analyst at Schneider Electric, in a note.