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Oil Soars on Cocktail of US Pipeline Closure, Gasoline Squeeze and Inflation Spike

CommoditiesMay 12, 2021 06:39PM ET
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© Reuters.

By Barani Krishnan and Liz Moyer

Investing.com — Oil markets edged higher for a fourth day in a row on Wednesday as the gasoline price at U.S. pumps hit seven-year highs of around $3 per gallon and the government reported that inflation was roaring at levels last seen in 2008.

The combined concerns over tight fuel supplies and upward price pressures made traders almost completely ignore a smaller-than-expected drop in weekly crude supplies and the first production build estimated in two months.

New York-traded West Texas Intermediate, the benchmark for U.S. crude, settled up 80 cents, or 1.2%, at $66.08 per barrel. WTI is up almost 1.4% on the week.

London-traded Brent, the global benchmark for crude, finished up 77 cents, or 1.1%, at $69.32.

Gasoline futures settled up 21 cents, or 1%, at $2.16 per gallon.

The run-up in crude prices came as U.S. oil industry executives pleaded with Americans not to hoard fuel, saying there would be adequate gasoline for all without the panic buying that has broken out with the shutdown of the Colonial Pipeline, country’s largest fuel delivery system.

Colonial delivers about 45 percent of the fuel consumed on the US East Coast. Its shutdown since Friday due to a cyberattack has left many fuel stations in the region without supply, forcing motorists to hunt for gasoline anywhere they could find. The operator of the pipeline said on Wednesday it has begun the process of restarting the network.

Prior to that announcement, there were reports of people trying to fill their tanks even when they had adequate supply, causing massive long lines at pumps that were still working. At least one media image showed a plastic bag hanging over the nozzle at a pump, prompting the U.S. Consumer Product Safety Commission to tweet: "Do not fill plastic bags with gasoline. Use only containers approved for fuel."

Earlier in the day, the Labor Department reported that the U.S. Consumer Price Index grew by 4.2% over a one-year period in April for its largest increase in almost 13 years, confirming a huge tick up in inflation after months of commodity price increases in an economy rapidly recovering from the coronavirus pandemic.

“After digesting a larger-than-expected inflation report, crude prices pushed higher despite a stronger dollar as expectations grow that global crude demand recovery will be very strong in the second half of the year,” said Ed Moya, analyst at online broking portal OANDA.  

“The path for crude prices appears to be higher but until the situation improves in India, WTI will probably struggle to break above the early March high.”

India, the world’s third largest oil buyer facing carnage from the coronavirus, might have a virus variant that could be more infectious than the original Covid-19, the World Health Organization warned. 

Earlier on Wednesday, the Energy Information Administration reported a smaller-than-expected decline in crude stockpiles.

Crude oil inventories fell 427,000 barrels last week, compared with analysts' expectations for a draw of 2.817 million barrels.

 Gasoline inventories rose 378,000 barrels last week the EIA said, compared with expectations for a draw of 600,000 barrels.

U.S. crude exports, meanwhile, fell to 1.8 million barrels per day last week from a record 4.1 million bpd in the previous week. 

Crude production rose by an estimated 100,000 barrels daily, returning to the 11 million barrels per day mark for the first time in two months, the EIA said.

The only positive number in the weekly dataset was in distillate stockpiles, which include diesel and heating oil. This fell 1.733 million barrels in the week against expectations for a draw of 1.080 million barrels.

 

Oil Soars on Cocktail of US Pipeline Closure, Gasoline Squeeze and Inflation Spike
 

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Comments (10)
Hunter Gassaway
Hunter Gassaway May 12, 2021 5:14PM ET
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Great term for gas hoarders you wrote, even though it's a typo...Americansnot! That applies to all those who hoarded TP as well.
Andrew Allen
Andrew Allen May 12, 2021 5:14PM ET
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just like the nobles of the French revolution, the crooks of the Soviet Union...always blame the people not the inept government organizers! where's your red sash commie?
Casador Del Oso
Casador Del Oso May 12, 2021 4:36PM ET
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SP500 2200 here we come.
Vijay Tomer
Vijay Tomer May 12, 2021 10:52AM ET
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What effect on crude oil rate higer or lower?
Mohamed Ajeeb
Mohamed Ajeeb May 12, 2021 10:52AM ET
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Lower
Eduff San
Eduff San May 12, 2021 10:52AM ET
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Mohamed Ajeeb you sure? oil keep high. It will break 70 soon
vince smith
vince smith May 12, 2021 10:52AM ET
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Nothing makes sense anymore to much government manipulation
Mohamed Ajeeb
Mohamed Ajeeb May 12, 2021 10:52AM ET
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Eduff San yeah. Pipeline closure, covid situation in india and the EIA inventory report are factors for the price to fall. But hitting 70 mostly by next month.
Gene Kret
Gene Kret May 12, 2021 10:52AM ET
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Dont forget, here come the headlines out of the Middle East....the news that Iran is supplying weapons then the US threat from Sleepy Joe. $80- $90 by July.... Covid will be all extinct as soon as India gets vaccinated. The oil producers have to make up for last years short fall so they will come up with a “barrel” shortage.... UCO UCO UCO
Vijay Tomer
Vijay Tomer May 12, 2021 10:51AM ET
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effect on crude oil rate higer or lower?
Heak josh
Heak josh May 12, 2021 10:51AM ET
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economic Outlook, supply disruption, demand forecast, production cut or hike.
Vicente gimena Canite
Vicente gimena Canite May 12, 2021 10:50AM ET
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hahahahah miz you today
Anil Tiwari
Anil Tiwari May 12, 2021 10:50AM ET
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why nasdaq falling down?
Hamed Pirmahdi
Hamed Pirmahdi May 12, 2021 10:47AM ET
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very nice
tufail khalil
tufail khalil May 12, 2021 10:42AM ET
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why is XTI going up then
Reo Ma
Reo Ma May 12, 2021 10:40AM ET
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Benedikt Dujmović
Benedikt Dujmović May 12, 2021 10:37AM ET
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yea
 
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