Oil jumps to 13-week high on rising U.S. gasoline demand
Oil prices jumped over 2% to a 13-week high on Wednesday as U.S. demand for gasoline keeps rising despite record pump prices, while expectations that China's oil demand will increase faced growing supply concerns in several countries, including Iran.
Iran said it was removing two International Atomic Energy Agency surveillance cameras at a uranium enrichment facility as the board of the United Nations' nuclear watchdog passed a resolution criticizing Iran for failing to fully explain uranium traces at undeclared sites.
The move has raised tensions with the United States and other countries negotiating with Iran over its nuclear program, and will likely keep sanctions in place and Iranian oil out of the global market for longer.
Analysts have said a nuclear deal with Iran could add about 1 million barrels per day (bpd) of crude to world supply.
Brent futures rose $3.01, or 2.5%, to settle at $123.58 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $2.70, or 2.3%, to end at $122.11.
Those were the highest closes for both Brent and WTI since March 8, which were their highest settlements since 2008.
U.S. commercial crude oil inventories rose unexpectedly last week, while crude in the Strategic Petroleum Reserve (SPR) fell by a record amount as refiners' inputs rose to their highest since January 2020, the Energy Information Administration said.
U.S. gasoline stocks fell by a surprise 800,000 barrels as demand for the fuel rose despite sky-high pump prices. Analysts polled by Reuters had expected gasoline stocks to rise 1.1 million barrels. ,
"The gasoline draw is a highlight of the report with a tight market place across the U.S.," said Tony Headrick, energy market analyst at CHS Hedging, noting demand remained strong even with pump prices above $5 per gallon in many parts of the country.
Auto club AAA said national average retail regular unleaded gasoline prices hit a record $4.955 per gallon on Wednesday.
China's major A-share indexes and Hong Kong's Hang Seng finished trade at two-month closing highs. Oil traders expect fuel demand to recover as lockdowns to fight the pandemic are eased in the world's biggest oil importer.
"With demand recovering as much as 1.0 million bpd in China and rising seasonally in the U.S., even record SPR withdrawals may prove insufficient to ... balance a significantly undersupplied market," analysts at EBW Analytics said in a note.
The International Energy Agency warned that Europe, which has sanctioned Russia following its invasion of Ukraine, could face energy shortages next winter.
On the supply side, traders noted several countries could face problems boosting output.
In Norway, a number of oil workers plan to strike from June 12 over pay, putting some crude output at risk of shutdown.
Efforts by the Organization of the Petroleum Exporting Countries and their allies, including Russia, a group known as OPEC+, to boost output are "not encouraging", United Arab Emirates' Energy Minister Suhail al-Mazrouei said, noting the group was currently 2.6 million bpd short of its target.