By Barani Krishnan

Investing.com — Crude prices settled up 3% on Wednesday, recouping all of the previous day’s losses and more on talk of new possible sanctions on major exporter Russia amid OPEC+’s determination to not allow the market much breathing room in new supply.

The Energy Information Administration’s report of the first weekly build since January in U.S. gasoline and last week went largely ignored despite the bearish implications of a market potentially seeing demand destruction with pump prices at near record highs of above $4 per gallon.

The larger-than-expected weekly drawdown in U.S. also came mostly from the government’s release of emergency supplies from the Strategic Petroleum Reserve.

In the hopes of lowering crude oil prices, the Biden Administration has supplied refiners with crude loaned from the SPR over the past few months. There has been negligible effect so far on crude prices from the government’s effort as refiners have been turning more products than they usually do at this time of year, resulting in extraordinarily high crude drawdowns.

The London-traded benchmark for oil prices settled its official session at $113.45 a barrel, up 3.22 points or 2.9%. Brent lost 2% Tuesday.

New York-traded U.S. crude benchmark, WTI (or WTI) rose $3.58 or 3.4% at $107.82 WTI dropped 1.6% the day before.

The United States and its allies plan new sanctions on more sectors of Russia’s economy, including military supply chains.

“We would see an additional 1 million barrels per day of Russian production at risk if relations with Europe worsen and an oil embargo is put in place, although we still see this as unlikely,” consultancy JBC Energy said in a note cited by Reuters.

Multiple sources close to the organization said that major oil producers would likely adhere to the planned increase in output of approximately 432,000 bpd. OPEC+ – the Organization of the Petroleum Exporting Countries, and its allies including Russia – meets this Thursday.

According to the EIA’s Weekly Petroleum Status Report, Wednesday’s publication by Wednesday showed that gasoline stocks rose by 785,000 barrels while distillates stockpiles grew by nearly 1.4 million barrels.

U.S. media polled analysts and predicted a decrease of gasoline inventories of about 1.7million barrels, as well as a decline of approximately 1.55 million distillates.

Automobile fuel gasoline, also known as petrol outside the United States, is America’s most-consumed oil product. The distillates are used to make diesel for cars, trucks, trains, and planes. They have also been the most popular growth part of the US oil industry for several months. Inventory has fallen almost non-stop since January.

On Wednesday, the US national average pump price was at $4.23 per gallon. This is just $1 below the record $4.33 recorded by American Automobile Association on March 11.

“It shows that high prices are doing their work in causing demand destruction to oil,” said John Kilduff, partner at New York energy hedge fund Again Capital.

EIA reported also that crude oil inventories dropped by nearly 3.5 million barrels over the week. This is in contrast to industry estimates of a 1.02 million drawdown.

But a breakdown of the numbers issued by the agency showed that 3 million barrels of that came from the U.S. Strategic Petroleum Reserve — suggesting that other sources of demand for crude accounted for just about half a million barrels.

Last week’s refinery utilization reached a multiweek peak of 92.1%. This suggests that refiners are producing products faster than usual to avoid a shortage later.