(Bloomberg) -- Oil jumped on further signs of tightness in key US product markets and speculation that China may be moving closer to easing anti-virus lockdowns that have sapped crude demand in the world’s largest importer.
West Texas Intermediate rose above $113 a barrel after falling on Tuesday. The American Petroleum Institute reported gasoline inventories sank by more than 5 million barrels last week, according to people familiar with the data, which also showed lower crude holdings. Official figures come later on Wednesday.
In Asia, meanwhile, traders are on the lookout for signals that Chinese officials may be poised to ease curbs imposed on Shanghai and other cities to combat a coronavirus outbreak, potentially reviving energy consumption. The main commercial hub again reported no new cases outside of quarantine.
Oil is on course for a sixth monthly rise -- potentially the best run in a decade -- as rising demand and disruptions from the war in Ukraine combine to support gains. The surge is contributing to higher inflation, and Federal Reserve Chair Jerome Powell vowed Tuesday that the US central bank would keep raising interest rates until there is clear evidence price gains are slowing.
“US inventory data has proved supportive for oil,” said Warren Patterson, Singapore-based head of commodities strategy at ING Groep (AS:INGA) NV. “A tightening gasoline market as we head into driving season should be supportive for crude demand, given the need for higher refinery runs.”
Oil markets are in backwardation, a bullish pattern in which near-term prices trade above those further out. The spread between WTI’s two nearest December contracts is near $13 a barrel, up from $5 at the start of the year.
US gasoline prices, both futures contracts and at the pump -- have touched unprecedented levels despite President Joe Biden ordering a vast release of crude from strategic reserves. Gasoline holdings have already dropped by about 3% in 2022, and stand below the five-year seasonal average.
With the summer driving season about to begin, there’s plenty of pain at the pump. Retail gasoline prices have risen above $4 a gallon in all US states for the first time, with California, the most expensive state, seeing prices average more than $6 a gallon, according to data from auto club AAA.
©2022 Bloomberg L.P.
