By Barani Krishnan
Investing.com — Crude prices settled up 3% on Wednesday, recouping all of the previous day’s losses and more on talk of new possible sanctions on major exporter Russia amid OPEC+’s determination to not allow the market much breathing room in new supply.
The Energy Information Administration’s report of the first weekly build since January in U.S. gasoline and last week went largely ignored despite the bearish implications of a market potentially seeing demand destruction with pump prices at near record highs of above $4 per gallon.
The larger-than-expected weekly drawdown in U.S. was accompanied by a release of almost as much crude from emergency stockpiles of the Strategic Petroleum Reserve.
The Biden administration has been supplying refiners with loaned crude from the SPR for months in the hope that it will ultimately result in lower prices for both crude and finished products like gasoline and diesel. There has been negligible effect so far on crude prices from the government’s effort as refiners have been turning more products than they usually do at this time of year, resulting in extraordinarily high crude drawdowns.
London-traded , the global oil benchmark, settled the official session up $3.22, or 2.9%, at $113.45 per barrel. Brent fell 2% on Tuesday.
New York-traded U.S. crude benchmark , or WTI, rose $3.58, or 3.4%, at $107.82. WTI fell 1.6% in the previous session.
The United States and its allies plan new sanctions on more sectors of Russia’s economy, including military supply chains.
“We would see an additional 1 million barrels per day of Russian production at risk if relations with Europe worsen and an oil embargo is put in place, although we still see this as unlikely,” consultancy JBC Energy said in a note cited by Reuters.
Major oil producers are likely to stick to their scheduled output target increase of about 432,000 bpd when OPEC+ – the Organization of the Petroleum Exporting Countries and allies including Russia – meets on Thursday, several sources close to the group said.
Stockpiles of gasoline rose by 785,000 barrels last week while that of distillates grew by almost 1.4 million barrels, the EIA said in its Weekly Petroleum Status Report published Wednesday.
Analysts polled by U.S. media had expected a drop of 1.7 million barrels in gasoline inventories and a reduction of 1.55 million for distillates last week.
Automobile fuel gasoline, also known as petrol outside the United States, is America’s most-consumed oil product. Distillates, which are refined into diesel for trucks, buses, trains and ships as well as fuel for jets, have been the strongest growth component of the US oil complex for months, seeing virtually non-stop inventory declines since early January.
The build in gasoline stockpiles come as the national average pump price in the United States held at above $4.23 per gallon on Wednesday, just a dime below the March 11 record high of $4.33 reported by the American Automobile Association.
“It shows that high prices are doing their work in causing demand destruction to oil,” said John Kilduff, partner at New York energy hedge fund Again Capital.
The EIA also reported that crude oil inventories fell by almost 3.5 million barrels last week versus industry estimates for a drawdown of 1.02 million.
Some 3 million barrels, meanwhile, came out of the U.S. Strategic Petroleum Reserve. That will be factored into the balance to be reported by the EIA next Wednesday as crude inventories for the current week to April 1.
Refinery utilization was at a multi-week high of 92.1% last week, suggesting that refiners were churning out products at a faster-than-usual rate on concerns that the market may get caught with short supply later.