Oil up 3% as US gasoline demand trumps stockpile build

In Wednesday’s trade, Brent settled up more than 3 percent at $34.41 a barrel, partly due to shipment problems for UK’s North Sea crude.

US gasoline demand, however, rose 5.2 percent over the past four weeks compared with a year ago, while inventories of motor fuel decreased by 2.2 million barrels, the report said.

Oil prices stabilised on Wednesday (Feb 24) as traders looked past an increase in United States crude inventories to a welcome drop in gasoline supplies. The rise was only half as big as the 7.1 million barrels reported by the American Petroleum Institute late Tuesday. Prices traded at $30.92 before the data.

IG Markets analyst Bernard Aw said that following Iran’s comments, “there is unlikely to be any concrete plans to ease the supply glut in the near term”.

Saudi Arabia’s influential oil minister Ali al-Naimi on Tuesday said (http://www.marketwatch.com/story/oil-prices-peel-back-some-of-mondays-rally-as-investors-cash-in-on-gains-2016-02-23)”there is no sense in wasting our time seeking production cuts”.

The Saudi-led OPEC has stepped up diplomatic activity with other oil producers after crude prices hit 12-year lows last month.

WTI settled up nearly 1 percent at $32.15 a barrel as strong US gasoline consumption data alleviated worries about mounting crude stockpiles. OPEC and non-OPEC producers, who support the idea of a production freeze, are planning a mid-March meeting, Venezuela’s Oil Minister said.

The EIA report “contained some very strong gasoline demand signals in there, so the uptick in crude prices might be associated with the impact of rising demand against declining production, which typically pushes prices higher”, said Richard Hastings, macro strategist at Seaport Global Securities.

“I expect a $3 discount in WTI to Brent by next week, and that to possibly build to $5 or $6 in coming weeks or months”, said John Kilduff, partner at NY energy hedge fund Again Capital.