DTN Oil

WASHINGTON (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange advanced in pre-inventory trade Wednesday after industry data from the American Petroleum Institute reported gasoline stocks in the United States declined by a larger-than-expected margin for the second consecutive week in May. This heightened fears over low inventory levels heading into the summer driving season, while upbeat data on consumer spending and industrial production for April showed continued momentum for the U.S. economy despite rising inflation.

U.S. industrial production increased more than expected in April and marked the fourth consecutive month of gains above 0.8% amid continued strong demand for durable goods. Consumer demand for durable goods such as autos and home appliances have underpinned growth in manufacturing for more than two years into the pandemic. For comparison, production at U.S. factories for the first three months of the year was 0.6% higher compared with the same period a year ago even as inflation surged to a four-decade high 8.3%.

"In April, all major market groups recorded gains, with most rising around 1%. A step-up in the production of motor vehicles contributed to increases of 1.5%, 3.3%, and 1.1% for consumer durables, transit equipment, and durable materials, respectively," said the U.S. Federal Reserve in its monthly report on industrial production.

Furthermore, U.S. retail sales for April showed Americans are still spending on merchandise at a rapid clip, potentially fueled by credit-card borrowing, suggest some economists.

The value of overall retail purchases increased 0.9% in April, after an upwardly revised 1.4% gain in March, Commerce Department figures showed Tuesday. Excluding vehicles and gas stations, sales rose 1% last month. The figures are not adjusted for inflation.

Separately, API late Tuesday showed commercial crude oil stocks in the United States declined 2.445 million barrels (bbl) for the week ended May 13, contrasting with estimates for a 1.4-million-bbl build, with inventory at the Cushing tank farm in Oklahoma having been drawn down 3.071 million bbl. Gasoline stocks declined by a steep 5.102 million bbl that was more than estimates for a 1-million-bbl decrease. Against expectations for no change in distillate fuel inventory during the week ended May 13, API reported a 1.075-million-bbl build.

Demand for motor gasoline regained momentum in the second week of May, according to DTN Refined Fuels Demand data, increasing 2.7% from the previous week. At 225 million bbl, gasoline stockpiles currently stand at the lowest level this year and about 5% below the five-year average.

Traders will continue to closely monitor the weekly change for gasoline and distillate stocks in the United States after inventories have fallen to critically low levels ahead of the start of summer travel season. The closely watched report from the U.S. Energy Information Administration is scheduled for a 10:30 a.m. EDT release.

Media airwaves were hit with reports Tuesday afternoon the Biden administration will begin to ease some sanctions on Venezuelan oil exports to encourage ongoing dialogue between Venezuela's President Nicolas Maduro and the opposition. Although details of negotiations have not been made public, speculation has swirled for months that the White House is prepared to replace some Russian oil exports sanctioned in response to President Vladimir Putin's invasion of Ukraine with Venezuelan barrels. Previously, the White House allowed Chevron to negotiate a license with Venezuelan state-owned oil company PDVSA, but has not allowed entry into any production agreement. That might change this week.

Near 7:30 a.m. EDT, NYMEX June West Texas Intermediate advanced $1.91 bbl to $114.32 bbl, and Brent crude rallied to $113.36 bbl, up $1.43 bbl. NYMEX June RBOB futures softened 0.40 cents to $3.9770 gallon, retreating from Monday's $4.0640 record high on the spot continuous chart, while the June ULSD contract surged 2.67 cents to $3.8260 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com