(Bloomberg) – Oil jumped on further signs of tightness in key US product markets and speculation that China is getting closer to easing antivirus lockdowns that have undermined crude oil demand at the world’s largest importer.
West Texas Intermediate reached $114 a barrel during early Asian trading after finishing 1.6% lower on Tuesday. The American Petroleum Institute reported that gasoline inventories shrunk by more than 5 million barrels last week, according to people familiar with the data. Crude oil positions were also lower.
In Asia, meanwhile, traders are looking for signs that Chinese officials are ready to ease curbs imposed on Shanghai and other cities to fight a coronavirus outbreak, potentially pushing energy consumption back up. The main commercial hub again reported no new cases outside of quarantine.
Oil is on track for a sixth monthly rise — possibly its best run in a decade — as rising demand and disruptions from the war in Ukraine combine to bolster gains. The rise is fueling higher inflation, and Federal Reserve Chairman Jerome Powell promised Tuesday that the US central bank would continue to raise interest rates until there is clear evidence that price increases are slowing.
US gasoline prices, both futures contracts and at the pump, have reached unprecedented levels despite President Joe Biden’s order to release a massive amount of crude oil from strategic reserves. Gasoline inventories have already fallen by about 3% in 2022 and are below the five-year seasonal average.
With the summer driving season just around the corner, there is a lot of pain at the pump. Retail gasoline prices have risen above $4 a gallon for the first time in all U.S. states, with California, the most expensive state, seeing prices average above $6 a gallon, according to AAA data.
The oil markets are in backwardation, a bullish pattern in which prices trade in the short term above those further out. The spread between WTI’s two closest December contracts is above $13 a barrel, compared to $5 at the start of the year.
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This post Oil surges as US gas market tightens, China can ease curbs
was original published at “https://financialpost.com/pmn/business-pmn/oil-rallies-as-us-gasoline-market-tightens-china-may-ease-curbs”