By Barani Krishnan
Investing.com -- Oil breached $120 a barrel on Wednesday after U.S. government data showed weekly consumption far beyond market estimates, while major producer Russia continued to cite outages on the Caspian pipeline that played on the nerves of traders.
London-traded Brent, the global benchmark for oil, settled up $6.12, or 5.3%, at $121.60. Supply scares had already pushed Brent up by a net 7% in the past two sessions, giving it a week-to-date gain of 13% that would be its biggest since the 20% rally during the week that marked the start of Russia’s invasion of Ukraine.
U.S. crude’s West Texas Intermediate, or WTI, benchmark settled up $5.66, or 5.2%, at $114.93. WTI was up about 9% on the week.
Wednesday’s rally came after data from the U.S. Energy Information Administration's larger-than-expected drawdowns in crude, gasoline and distillate stockpiles.
In Russia, Energy Minister Alexander Novak reiterated the caution from a day ago that oil supplies by the Caspian Pipeline Consortium, which ships around 1.2 million barrels per day of Kazakh and Russian oil combined, may be completely stopped for up to two months due to storm-damaged berths on the Black Sea terminal.
In a throwaway to oil bulls, Novak also said he was unaware of any member of OPEC+ — the 23-member oil producing alliance jointly shepherded by Saudi Arabia and Russia — with plans to raise output beyond quotas set by the group to ensure its monthly exports growth doesn’t exceed 400,000 barrels per day.
There had been talk earlier this month that the United Arab Emirates — the only OPEC+ producer other than Saudi Arabia with the capacity to add meaningfully to output — might export beyond its quota to alleviate the global tightness in crude supply. But Saudi disapproval, implied rather than expressed, had quickly dissuaded the Emirates from doing anything to disrupt OPEC+ harmony in sticking together as a group and milking the most out of oil prices.
“It’s OPEC+’s version of the ‘maximum pain strategy’, aimed at consuming countries,” said John Kilduff, founding partner at New York energy hedge fund Again Capital.
US crude stockpiles fell by 2.51 million barrels last week, after a build of 4.35 million reported during the prior week to March 11. Analysts tracked by Investing.com had expected crude inventories to continue rising in the week to March 18, by some 144,000 barrels on average.
On the gasoline inventory front, a drawdown of 2.95 million barrels added to the 3.62 million run down in the week prior. Analysts had forecast a gasoline consumption of 1.99 million barrels on the average for last week. Automobile fuel gasoline, also known as petrol outside the United States, is America’s most-consumed oil product, seeing drawdowns for seven straight weeks now.
With distillate stockpiles, the drawdown was 2.07 million barrels versus the previous week’s build of 332,000. Analysts had estimated a distillates drop of 1.39 million barrels during the week to March 18. Distillates, which are refined into diesel for trucks, buses, trains and ships as well as fuel for jets, have been the strongest growth component of the US oil complex for months, seeing virtually non-stop inventory declines since mid-January.