Oil Climbs as Report Indicates Tightening US Gasoline Stockpiles

Oil prices have rebounded after a two-day decline, driven by an industry report indicating a further decrease in U.S. gasoline inventories ahead of the summer driving season, alongside comments from Saudi Arabia suggesting there are no additional measures it can take to stabilize the market.

West Texas Intermediate futures rose toward $111 per barrel, recovering from a nearly 3% drop over the past two sessions. According to the American Petroleum Institute, gasoline stocks fell by 4.22 million barrels last week, with current levels being the lowest for this time of year since 2013.

The oil market has experienced significant volatility since late February due to the impact of Russia’s invasion of Ukraine and a resurgence of COVID-19 cases in China. A Saudi minister emphasized that the kingdom has done its part for the oil market and noted that there is currently no shortage of crude.

The ongoing conflict in Ukraine has disrupted traditional trade routes and fueled global inflation, causing fuel prices in the U.S. to repeatedly reach record highs. Moreover, unexpectedly strong gasoline exports from the U.S. have contributed to the decline in domestic stockpiles as the summer driving season approaches.

Victor Shum, a vice president at S&P Global Commodity Insights, noted that inventories for crude oil and its products remain low. However, he also pointed out that weak demand from China and rising inflation are limiting further price increases.

Additionally, U.S. distillate inventories, which include diesel, saw a reduction of 949,000 barrels last week, while crude stockpiles showed an increase, with further data from the Energy Information Administration set to be released later in the day.

During a panel at the World Economic Forum in Davos, Saudi Foreign Minister Prince Faisal bin Farhan stated that the current oil supply is reasonably balanced and reaffirmed that the kingdom has done all it can in this regard.

In a coordinated effort to manage rising energy prices, the U.S. is leading a release of global crude reserves. Recently, the Department of Energy announced the sale of strategic stockpiles, offering up to 40.1 million barrels of predominantly sour crude.