By Barani Krishnan

Investing.com. The rally in oil prices reached a new high on Thursday, following a record-breaking increase in U.S. gasoline inventories. Market bulls said that the stockpiles were not a rally-killer as the market is focused on global supply and demand disruptions.

“I don’t think the build in gasoline supplies is a bull killer,” Phil Flynn, a senior energy analyst at Chicago brokerage Price Futures Group and an avowed oil bull, said in a comment carried by Reuters.

“We’re going to need refiners to continue to refine to meet gasoline demand in the summer driving seasons – that is one of the reasons the market is still supported despite the build in gasoline supplies,” Flynn added. 

The Energy Information Administration data Wednesday showed that U.S. gasoline stocks increased by 6 million barrels last Thursday and grew to 24 million barrels during a three week period. This was despite weak demand due to the rise in global oil prices.

Data suggests that gasoline demand has declined since holiday travels ended in 2021.

The U.S. oil refiners appear to have a surplus of crude oil, which is fueling a lot of driving and work commutes. However the Omicron coronavirus reduced some of these activities.

“Gasoline consumption is the weakest component of the entire U.S. oil complex now,” said John Kilduff, founding partner at New York energy hedge fund Again Capital. “It’s one of the wackiest datasets amid the current oil rally, even after discounting the seasonally-weak January to March period for road travel.”

Automobile fuel gasoline, also known as petrol outside the United States, is America’s most-consumed oil product. Last week’s stockpile rise of 5.873 million barrels came on top of back-to-back previous builds of 7.961 million and 10.128 million barrels. EIA data revealed that gasoline inventories have increased by approximately 37 million barrels within eight weeks.

The stockpile of crude oil in the United States saw an increase for the first week in eight weeks. It grew 515,000 barrels, following a decline of 4.55 million the week before. Only 6 Million barrels of crude oil have been reduced in the last three weeks. This explains only a portion of the gasoline supply.

After an increase in 2.54 million last week, the U.S. stockpiles of oil distillates (which are used to make diesel for cars, trucks, trains, and planes) fell by 1.431million barrels.

U.S. crude oil benchmark settled down 0.1% at $86.90/barrel.. WTI is up nearly 2% week-to-week. It hit a 7-year high $87.91 the previous session.

Also, London-traded, which is the international benchmark for oil and also closed down 6.1% at $88.38 a barrel. Brent remains up almost 2.5% for the week, after hitting a seven-year high of $89.48 earlier in Thursday’s session.

Globally, the rally in crude oil prices is a result of years of underinvestment in new exploration and production. The impact now shows as the demand starts to normalize two years after the outbreak. 

There is also a shortage of oil new. Producer alliance OPEC+ continues to squeeze the market with an estimated 4,000,000 barrels daily. These are the results of cuts of approximately 10,000,000 barrels per day made in the peak of Covid-triggered demand destruction. 

U.S. output, once the world’s largest with a pre-pandemic high of 13.1 million barrels daily, is now at under 12 million, thanks to unfriendly drilling policies of the Biden administration which wants renewable, green energy over fossils. 

Last but not least: oil prices have risen 60% in the last year due to the influx of investment dollars into crude oil for inflation hedge. Geopolitical tensions arising out of Houthi rebel assaults on the United Arab Emirates, a key OPEC+ supplier, led to oil prices rising this week. A pipeline rupture in Turkey also contributed to increased prices.

Sam Boughedda provides additional reporting