Florence Tan

SINGAPORE, (Reuters) – Oil prices rose on Wednesday in anticipation of U.S. data on oil inventories. Crude futures were supported by tight supplies. This is due to recovering fuel demand and the relaxation of COVID-19 restrictions in China’s top cities.

After closing on Tuesday at its highest level since May 31, futures in August rose 0.2% to $120.79 per barrel, or 22 cents by GMT 0012 GMT.

U.S. West Texas Intermediate crude was $119.65/barrel in July, an increase of 24 cents or 0.2% since Tuesday’s March 8 settlement.

Reuters analysts polled expect another drop in inventories last week, although prices for gasoline and distillates could be higher. [EIA/S]

The American Petroleum Institute however showed that U.S. oil product and crude inventories increased last week.

On Wednesday, the U.S. Energy Information Administration will report at 10:30 AM EDT (1330 GMT).

The global crude and oil product supplies are still tight. This has boosted Asian refiners’ diesel margins to new records, as Western sanctions have hampered exports from Russia.

Trafigura’s CEO stated that oil prices will soon reach $150/barrel and rise this year. Demand destruction is likely before the year ends.

Globally, most refineries are operating at their full capacity to deal with rising demand for pandemic recovery or replace Russian supply.

Analysts at JP Morgan estimate that Russia exports oil products in the range of 500,000-700,000 barrels per hour. This is because it was more difficult to sell its crude than Moscow’s fuel.

In a statement, they stated that “Unless the new Middle East capability comes on line faster than expected or China lifts its product export caps,”

China filled its first batch export quotas for product on Tuesday. This was done to ease high inventories in China after declining demand due to COVID-19 lockdowns. However, volumes were much lower than last.

Oscar Yee, Citi analyst, stated in a note that while he didn’t see any significant impact on the diesel tightness at the moment, he would be watching for new refiners such as Petronas RAPID or Kuwait Al-Zour.