Low US oil inventories expectation pushes prices higher
Oil prices soared on Wednesday amid reports of lower US oil inventories, supported by strong demand expectations for the upcoming driving season.
Brent crude futures for August were up 21 cents, or 0.2%, to $120.79 a barrel at 0413 GMT after closing at the highest level since May 31 on Tuesday.
West Texas Intermediate (WTI) July crude was at $119.75 a barrel, up 34 cents, or 0.3%, after hitting the highest level since March 8 in the previous session.
Analysts expect last week's data to show a decline in US crude inventories as gasoline and distillate stockpiles rise to high levels. Crude oil stocks will decrease further as vehicular traffic increases during the driving season.
On the supply side, the oil market is expected to remain tight as there will undoubtedly be a shortage of low inventories.
But figures from the American Petroleum Institute (API) showed US stockpiles of crude oil and petroleum products rose last week.
The U.S. Energy Information Administration (EIA) will report last week's stock levels at 1430 GMT on Wednesday.
On Tuesday, the World Bank cut its global growth forecast for 2022 by nearly a third, warning that Russia's invasion of Ukraine has exacerbated the damage done by the COVID-19 pandemic and many countries are now facing recession.
Meanwhile, global supplies of crude and petroleum products remain tight as Western sanctions bar them from exporting from major producer Russia, pushing diesel margins at Asian refineries to record highs.
Globally, most refineries are already operating at near full capacity to meet increased demand from the pandemic recovery and make up for lost Russian supplies.
JP Morgan analysts estimate that Russia is reducing its exports of petroleum products by about 500,000 to 700,000 barrels per day.
Increasing demand for transport fuels in the northern hemisphere summer will increase the shortage of refined products, unless Middle East capacity comes in faster than expected or China decides to lift product export ceilings.
On Tuesday, China increased its first-product export quotas aimed at curbing high domestic stocks that have risen as the pandemic lockdowns have slashed demand. Despite the recent additions to the quotas, their volumes remain much lower than last year.
No significant effect is seen to alleviate existing diesel congestion.
Related Articles
Oil prices are rising as supply concerns increase amid expectations of a prolonged conflict in the Middle East
Oil prices continued to rise following US and Iranian attacks on ships serving their respective purposes
Oil prices closed higher this week following renewed US-Iran hostilities
