Oil Prices Surge as US Demand Rises and Supply Concerns Loom
In a dramatic turn of events, oil prices soared in early trade on Thursday, driven by robust demand in the US market. Gasoline stocks hit a three-month low, while crude stockpiles unexpectedly dropped, creating a perfect storm for the oil industry. The ongoing tensions between Ukraine and Russia only added fuel to the fire, intensifying supply concerns in the global market.
Market Movements: Brent Futures and US Crude on the Rise
Brent futures for May saw a solid climb of 11 cents, reaching $84.14 a barrel, while April US West Texas Intermediate crude rose by 10 cents to $79.82 per barrel. Both contracts surged to a four-month high on Wednesday, driven by the optimistic US demand outlook and escalating geopolitical risks.
The Impact of Strong US Demand and Geopolitical Tensions
ANZ analysts highlighted the influence of strong US product exports on the market dynamics. Gasoline stocks plummeted to a three-month low, boosting crack spread for refiners. The recent Ukrainian drone attack on a Russian refinery further exacerbated the geopolitical risks, adding to the bullish sentiment in the market.
US Inventory Data and Strategic Petroleum Reserve Purchase
The Energy Information Administration reported a significant decline in US gasoline inventories for the sixth consecutive week, with a massive draw of 5.7 million barrels. Meanwhile, US crude oil stockpiles also witnessed an unexpected drop due to increased processing. To support the demand side, the US made a strategic purchase of around 3.25 million barrels of oil for the Strategic Petroleum Reserve for August delivery.
Geopolitical Unrest: Ukrainian Drone Strikes on Russian Refineries
The geopolitical tensions reached a boiling point as Ukrainian drone strikes targeted Russian refining facilities for the second day. A major fire broke out at Rosneft’s largest refinery in Ryazan, leading to the shutdown of two primary oil refining units. This attack marked a significant escalation in the ongoing conflict between the two nations.
Market Outlook and Analyst Predictions
Senior market analyst at OANDA, Kelvin Wong, anticipated a consolidation in oil prices around the US$80.55/81.65 per barrel resistance zone for WTI crude. The tightening supply-side factors and the upcoming Fed’s FOMC meeting on 20 March are expected to drive further market fluctuations in the near future.