Oil Climbs as US Gasoline Market Tightens, China May Ease Curbs -Breaking
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© Bloomberg. Yoakum County (Texas), USA: Pump jacks extract crude oil on Thursday September 30, 2021. America’s oil community has deep financial ties with the fossil fuel sector. Even in the middle of an oil price boom, it is important that local governments decide when they will tackle the clean energy transition. Photographer: Matthew Busch/Bloomberg(Bloomberg) — Oil jumped on further signs of tightness in key US product markets and speculation that China may be moving closer to easing anti-virus lockdowns that have sapped crude demand in the world’s largest importer.
After Tuesday’s fall, West Texas Intermediate gained $113 per barrel. People familiar with data from the American Petroleum Institute indicated that gasoline inventories dropped by more than 5,000,000 barrels over the past week. The official figures will be released later Wednesday.
Trades in Asia are looking for signs that Chinese officials might be ready to relax curbs placed on Shanghai and other Chinese cities to fight a coronavirus epidemic. This could potentially revive energy consumption. No new cases were reported by the main commercial hub outside of quarantine.
Due to rising demand, disruptions from war in Ukraine and support for gains, oil could see a sixth month of growth — possibly the greatest run in a decade. This is leading to an increase in inflation. Federal Reserve Chair Jerome Powell said Tuesday that the US central banking would continue raising interest rates until evidence shows price increases are slowing.
“US inventory data has proved supportive for oil,” said Warren Patterson, Singapore-based head of commodities strategy at ING Groep (AS:) NV. “A tightening gasoline market as we head into driving season should be supportive for crude demand, given the need for higher refinery runs.”
Backwardation is a bullish trend in oil markets that sees near-term prices trading higher than those farther out. The spread between WTI’s two nearest December contracts is near $13 a barrel, up from $5 at the start of the year.
US gasoline prices — at the pump as well as futures contracts — reached new heights, despite President Joe Biden’s massive release of oil from strategic reserves. Already, gasoline holdings are down by about 3 percent in 2022 and remain below the 5-year average.
With the summer driving season about to begin, there’s plenty of pain at the pump. According to AAA data, gasoline retail prices in the US have increased above $4 per gallon for the first-time. California is the most costly state with prices that average over $6 per gallon.
©2022 Bloomberg L.P.
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