Oil rises 3 percent in broad rally ahead of expected stockpile drop
Crude oil prices jumped 3 percent on Tuesday, and gasoline and diesel rose as much, as bulls ramped up bets across the oil complex for another weekly drop in U.S. stockpiles.
U.S. crude inventories likely fell for a sixth straight week in the week ended June 5, data from industry group American Petroleum Institute (API) is expected to show later on Tuesday before official numbers on Wednesday from the government’s Energy Information Administration (EIA).
A Reuters poll of five analysts forecast on average that crude stocks fell 1.7 million barrels last week. [EIA/S]
Brent futures LCOc1 were up $1.88, or 3 percent, at $64.57 a barrel by 12:29 p.m. EDT (1629 GMT). That was the largest advance on the day for Brent since May 29.
U.S. crude futures CLc1 rose by $1.70 to $59.84.
Among refined products, gasoline RBc1 rose about 3 percent while ultra low sulphur diesel, also known as heating oil HOc1, gained almost 4 percent.
“It’s an across-the-board run as we wait for the inventory data,” said Phil Thompson at Mobius Risk Group, an energy investment advisory in Houston.
Ahead of the stockpile numbers on Wednesday, the EIA in a separate report raised its forecast for this year’s oil demand to 380,000 barrels per day from 340,000 bpd previously.
Still, some were surprised by Tuesday’s rally, which marked an abrupt break from the bearish mood since last week when producer group OPEC decided to stick to its output despite a worldwide glut in oil.
A few said the run-up in prices could be due to expectations that demand for gasoline and diesel will pick up this month with the start of the peak season for road travel in the United States.
Even so, the Reuters poll forecast that stocks of distillates, which include heating oil and diesel fuel, rose by 1.2 million barrels last week. Gasoline inventories were estimated to have risen by 500,000 barrels.
Thompson at Mobius cited confidence in the high rate of refinery runs of late, which he said was another indication of energy demand.
“The refineries are running as close as they can manage to capacity, and that’s really been driving the strength in refined products,” he said.
Refinery utilization rates for crude oil were expected to have risen 0.5 percentage point last week to reach 93.7 percent, according to the Reuters poll.