Oil prices rose in early trade on Thursday mainly due to strong demand in the U.S. after gasoline stocks decreased to their lowest level in three months and crude stockpiles unexpectedly dropped. There are supply concerns after Ukrainian attacks on Russian refineries. Brent futures for May rose 11 cents (0.13%) to $84.14 a barrel at 0652 GMT, while April U.S. West Texas Intermediate (WTI) crude increased 10 cents (0.13%) to $79.82 per barrel.
On Wednesday, both contracts had already risen about 3% to a four-month high. This occurred due to the elevated U.S. demand outlook and heightened geopolitical risk. According to ANZ analysts in a client note, “Strong US product exports led gasoline stock to fall to a three-month low. Rising gasoline prices are supporting crack spread for refiners. The market also reacted to increasing geopolitical risks after a Ukrainian drone attacked a Russian refinery.”
The Energy Information Administration (EIA) reported on Wednesday that U.S. gasoline inventories fell for a sixth straight week, dropping by 5.7 million barrels to 234.1 million barrels, triple the expectations for a 1.9 million-barrel draw. Meanwhile, 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. Additionally, U.S. crude oil stockpiles fell unexpectedly as processing increased. On the demand side, the U.S. bought around 3.25 million barrels of oil for the Strategic Petroleum Reserve for August delivery.
Meanwhile, supply-wise, Ukrainian drone strikes on Russian refining facilities continued for a second day on Wednesday, causing a fire at Rosneft’s biggest refinery, which is one of the most serious attacks against Russia’s energy sector in recent months. In Ryazan, a drone attack caused a fire at Rosneft’s refinery, forcing the refinery to shut down two primary oil refining units. Kelvin Wong, senior market analyst at OANDA, stated “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.”