Oil gains near $120 as traders await summer demand uptick

Bloomberg

Oil extended gains from the highest close in three months as the US summer driving season ramps up and China emerges from virus lockdowns.
West Texas Intermediate futures rise above $120 a barrel, trading near a three-month high. Inventories at the nation’s biggest storage hub at Cushing, Oklahoma, falls 1.59 million barrels last week, according to an Energy Information Administration report on Wednesday. Gasoline inventories also dropped while demand rises.
Futures have fluctuated near a three-month high so far this week as banks including Goldman Sachs Group Inc and Morgan Stanley underlined calls for higher prices in the coming months.
On Tuesday, the American Petroleum Institute (API) reported that US gasoline stockpiles rise by 1.82 million barrels last week. That’s unlikely to provide much relief to a tight fuel market, with inventories at lowest seasonal level in years.
Shrinking inventories of refined products at the start of summer underscore a fundamentally tight supply situation. The four-week average for gasoline demand rises to 9 million barrels a day for the first time this year following Memorial Day weekend, which is the traditional kick off to the summer driving season. Demand is rising even as the national average price for gasoline, already at a record, approaches $5 a gallon.
The oil market has maintained its upward momentum this year as economies rebounded from the pandemic, though Russia’s invasion of Ukraine and a virus resurgence in China has led to extreme volatility at times. Last week, Opec+ lifted output by more than it had previously planned, though the group has struggled to meet its targets in recent months.
Diesel prices are surging faster than gasoline, with an unusually hefty premium for this time of year with the rest of the world is relying on the US to supply the most widely used oil product in Europe. An EU measure to forbid purchases of Russian refined petroleum products in the coming months is exacerbating an already tight fuel market.
US crude stockpiles rise by about 1.85 million barrels last week, while inventories of distillates increased by about 3.38 million barrels, the API said.