DTN Oil

WASHINGTON (DTN) -- The international crude benchmark Brent contract for May delivery on the Intercontinental Exchange settled above $84 bbl for the first time on a spot continuous basis since Nov. 2, 2023, rallying on bullish short-term outlooks pointing to a healthy rebound in fuel consumption during the second quarter, falling crude inventories in the United States, and escalating drone attacks on Russian refineries, forcing some refiners to halt operations that is raising concern about supply disruptions.

An overnight drone attack on Rosneft PJSC's Ryazan refinery, located roughly 100 miles southeast of Moscow, halted around 450,000 bpd of Russian crude processing capacity, according to multiple wire reports. Ryazan is a major refinery in the central region west of Urals that produces mostly diesel shipped to international markets, according to Rosneft's website. Russia exports roughly half of all diesel fuel it produces and 10% of its gasoline production.

Wednesday's strike on the Ryazan refinery is the latest in a series of successful drone attacks carried out by the Ukrainian military in an attempt to disrupt Russian energy infrastructure and revenues for conducting the war against Ukraine. A prolonged disruption in Russian refinery production could boost global diesel prices.

Also underpinning Wednesday's rally was the weekly supply report from the U.S. Energy Information Administration released midmorning showing commercial crude oil supplies in the United States were drawn down for the first time in seven weeks as refineries ramped up run rates following the conclusion of most seasonal maintenance programs.

Refinery capacity utilization increased for the second straight week through March 8th to the highest level since mid-January at 86.8%, up 1.9% from the previous week. In the gasoline complex, inventories plunged 5.7 million bbl during the week ended March 8th, well-exceeding market expectations for a 1.2 million bbl drawdown.

At 234.1 million bbl, commercial gasoline stockpiles currently stand 3% below the seasonal five-year average. Demand for gasoline remained above 9 million bpd for the second straight week, reaching a 9.044 million bpd 11-week high last week.

In contrast, distillate supplied to the U.S. market fell 700,000 bpd from a 15-week high to a 3.375 million bpd 2024 low, according to EIA. Distillate fuel inventory increased 888,000 bbl to 117.9 million bbl, marking the first stock build in eight weeks.

The crude contracts were also lent upside support by a second weekly decline in domestic oil production, falling another 100,000 bpd to 13.1 million bpd from a 13.3 million bpd record high output rate for the four weeks through Feb. 23.

At settlement, NYMEX April West Texas Intermediate futures advanced $2.16 to $79.72 bbl, and ICE May Brent futures rallied $2.11 to $84.03 bbl. April ULSD futures on NYMEX rallied $0.0686 to $2.6851 gallon, while front-month RBOB futures moved up $0.0751 to $2.6615 gallon.

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