Crude oil pushes higher on global tensions, signs of strong U.S. gasoline demand

U.S. crude oil futures closed at new five-month highs Wednesday, supported by data that showed a large drop in U.S. gasoline inventories and strong fuel demand ahead of the summer driving season.

Crude prices also have been lifted this week by worries over the potential for a wider Middle Eastern conflict, after Iran promised retaliation for an Israeli strike in Syria that killed a top general and others.

OPEC+ said it will keep its output cuts in place through the end of June, as expected, and said some participating countries that have overproduced will submit plans to compensate by the end of the month.

Front-month Nymex crude (CL1:COM) for May delivery closed +0.3% to $85.43/bbl, and front-month June Brent crude (CO1:COM) finished +0.5% to $89.35/bbl, the fourth straight daily gain and highest settlement value since October 27 for both benchmarks.

ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI), (NYSEARCA:XLE), (XOP), (VDE), (OIH), (XES), (IEZ), (CRAK)

Several energy names scored new intraday 52-week highs in today’s trading, including Antero Midstream (AM), Canadian Natural Resources (CNQ), CNX Resources (CNX), ConocoPhillips (COP), Crescent Point Energy (CPG), Delek US Holdings (DK), DT Midstream (DTM), Energy Transfer (ET), Enerplus (ERF), EnLink Midstream (ENLC), Enterprise Products Partners (EPD), Gulfport Energy (GPOR), Hess Midstream (HESM), HP Sinclair (DINO), International Seaways (INSW), Kinder Morgan (KMI), Liberty Energy (LBRT), Magnolia Oil & Gas (MGY), Marathon Petroleum (MPC), MDU Resources (MDU), MPLX (MPLX), Natural Gas Services (NGS), NRG Energy (NRG), Ovintiv (OVV), PBF Energy (PBF), Permian Resources (PR), Phillips 66 (PSX), Pioneer Natural Resources (PXD), Precision Drilling (PDS), Scorpio Tankers (STNG), Seadrill (SDRL), Shell (SHEL), SM Energy (SM), Southwest Gas (SWX), Suncor Energy (SU), Targa Resources (TRGP), TechnipFMC (FTI), Tidewater (TDW), TotalEnergies (TTE), Transportadora de Gas del Sur (TGS), Tsakos Energy Navigation (TNP), Vaalco Energy (EGY), Valero Energy (VLO), Vistra (VST), Western Midstream Partners (WES), Williams (WMB), World Kinect (WKC).

The U.S. reported a 3.2M-barrel build in domestic crude stocks, but gasoline showed a larger than expected drawdown of 4.3M barrels., which analyst Jim Ritterbusch said “looked bullish and although seasonal, the decline was spurred by a summer-like pace of demand that likely represented major quarter-ending distributor stockpiling.”

Perhaps more important was the EIA’s estimate of finished motor gasoline supplied – i.e., demand – which rose 521K bbl/day to 9.236M bbl/day, not far off the all-time high of 10.043M bbl/day in July 2021, Mizuho’s Robert Yawger said.

“Strong gasoline numbers in today’s EIA report raise the possibility that strong fundamentals around gasoline demand may be able to lead the barrels higher in coming weeks rather than geopolitical headlines, the best kind of rally,” according to Yawger.

Separately, the U.S. Department of Energy said it will not award oil supply contracts for Louisiana’s Bayou Choctaw Strategic Petroleum Reserve site in August and September due to high oil prices.

The DoE has said it aims to purchase oil for the SPR at a price of $79/bbl or lower, less than the average of ~$95/bbl it received for 2022 emergency SPR sales.