By Barani Krishnan
Investing.com -- If you thought oil prices would stay down, think again.
For a second day in a row, crude prices surged, rising about 4% on Wednesday after a more than 6% jump the previous session. That set oil up for a week-to-date gain of around 6%, after the back-to-back slide of the past two weeks that cumulatively set the market back by 13%.
Global crude benchmark Brent settled up $4.14, or 4%, at $108.78 per barrel, adding to Tuesday’s 6.3% gain.
New York-traded U.S. crude benchmark West Texas Intermediate, or WTI, finished the session up $3.65, or 3.6%, at $104.25. In the previous session, it rose 6.7%.
Crude prices began their ascent from Tuesday as China rolled back some of its most stringent Covid lockdown measures of the past two weeks, fostering hopes of a pick up in energy consumption in the world’s No. 2 oil consumer.
Oil was also helped in the previous session by the caution from the 23-strong OPEC+ alliance that its non-Russian members cannot — or will not — make up for Russian production lost as a result of Western sanctions.
Wednesday’s rally came on the back of higher U.S. fuel consumption indicated by weekly inventory data released by the Energy Information Administration, or EIA.
Besides the tick-up in automobile and truck fuels such as gasoline and diesel, Delta Airlines (NYSE:DAL) also touted consumer acceptance of higher fares that helped it offset costs, suggesting that demand for jet fuel will be on the rise too.
Adding to the market’s upside were new geopolitical tensions from the Russia-Ukraine conflict, with Moscow warning that any attack on its territory will be reciprocated with strikes at places where such decisions were made, including Kyiv.
“Oil prices are looking very comfortable above the $100 level as U.S. and Chinese demand seems to be heading in the right direction,” said Ed Moya, analyst at online trading platform OANDA.
The EIA said inventories of gasoline, America’s most-consumed oil product. fell 3.65 million barrels during the week to April 8, versus the decline of 2.04 million during the previous week to April 1. Analysts tracked by Investing.com had predicted a drop of just 388,000 barrels for last week.
Stockpiles of distillates, which are refined into diesel for trucks, buses, trains and ships as well as fuel for jets, fell 2.9 million barrels last week versus a build of 771,000 barrels the previous week. Analysts had expected a decline of 515,00 barrels for last week.
The decline in fuel products offset any bearish sentiment emanating from the highest weekly build in more than a year in US crude stockpiles amid huge releases from the country’s emergency reserves.
Crude inventories rose by 9.4 million barrels last week, versus the growth of 2.4 million in the previous week. Historical EIA showed it to be the highest weekly climb in oil stockpiles since the week ended March 5, 2021.
The build came amid a weekly release of 3.0 million barrels or more from the U.S. Strategic Petroleum Reserve, or SPR, authorized by the Biden administration to bridge a shortfall in supply intensified by the West’s sanctions on Russia. EIA data showed that for a second straight week, US imports of crude from Russia were at zero.
Analysts polled by US media had anticipated a build of 2.4 million barrels on the average for the week ended April 8.
“Oil inventories were the biggest surprise, rising much higher than expectations” despite the SPR releases, analyst Greg Michalowski said on the ForexLive platform.
President Joe Biden began tapping the SPR in November to provide US refiners with oil loaned from the reserve that they wouldn’t have to pay for but return within a stipulated period. By doing this, the president hoped there will be fewer transactions of oil in the open market and prices for both crude and fuel products like gasoline and diesel will come down.
Prior to this, the Biden administration had ordered the release of 30 million barrels from the SPR in March and another 50 million in November in coordination with other oil consuming countries that included China, Japan, India, South Korea and Britain.
The administration’s biggest SPR releases though will commence from May when it issues a total of 180 million barrels from the reserve. Another 60 million barrels are due from the reserves of other member states in the International Energy Agency.
But the government’s efforts have had negligible effect so far on energy prices, with a barrel of crude remaining at around $100 a barrel while a gallon of gasoline fetches about $4 gallon, not too far from record highs above $4.30 hit in March. This is because refiners have been turning out more fuel products than they usually do at this time of year, resulting in extraordinarily high usage.