DTN Oil

WASHINGTON (DTN) -- Following Tuesday's selloff triggered by deescalating tensions along the Russian-Ukrainian border, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange rallied early Wednesday after industry data from the American Petroleum Institute reported total petroleum stockpiles in the United States declined again last week, with commercial oil supplies standing at their lowest level since September 2018 at a time when fuel consumption shows signs of a solid rebound after demand was constrained from winter storms and Omicron surge of COVID-19 infections.

API reported late Tuesday U.S. commercial crude oil supplies fell 1.076 million barrels (bbl) during the week-ended Feb. 11, surpassing calls for a 600,000 bbl draw. If realized in data from the Energy Information Administration later this morning, the decline would be third consecutive drawdown from nationwide oil inventories that currently stand 11% below the five-year average. The report also showed crude stocks at the Cushing, Oklahoma, delivery point for West Texas Intermediate futures declined 2.382 million bbl last week.

The report was also bullish for the refined fuel complex, showing gasoline supplies fell 923,00 bbl in the week through Feb. 11 versus an expected build of 500,000 bbl, while distillate inventories declined 546,000 bbl. Analysts mostly expected distillate stocks to have declined 1.7 million bbl from the previous week.

Oil traders now wait for the official EIA inventory report scheduled for a 10:30 AM ET release.

Large stock draw coincides with rebounding demand for motor gasoline, with more Americans also seeing the relief from an abating COVID-19 surge. DTN Refined Fuels Demand data revealed gasoline demand in the United States surged 5.6% in the week-ended Feb. 11, while up 9.9% year-on-year. Demand for middle distillates spiked 7.5% from the prior week, reflecting rebounding demand from the prior week which saw demand weakness amid winter storms.

Demand strength relative to year-ago levels should be expected to continue to show through in this week's data, with Winter Storm Uri having sharply reduced demand amid curtailed mobility.

Also supporting gasoline demand in the United States, seven-day average of new coronavirus infections has fallen to a number not seen since early fall of last year, though cases remain higher than during much of the pandemic. The country had an average of 153,029 new cases per day as of Monday (2/14), down more than 80% from the pandemic high of 807,897 reached Jan. 22.

Internationally, most European countries have now lifted the remaining COVID-19 restrictions on business and travel, spurring hopes for a spring, summer rebound in jet fuel consumption. Germany announced Omicron curbs would be rolled back in three stages by March 20, while Austria and Switzerland are planning similar steps. Once the global epicenter of the crisis, Europe is looking to return to something close to normal this spring.

On the geopolitical front, Russian Defense Ministry continues to reaffirm that they are pulling back troops from the Ukrainian border after completing military drills, but U.S. and NATO officials argue there hasn't been any significant movement on the ground to suggest that an invasion is off the table. Kremlin has announced partial drawdown of Russian troops back to their bases on Tuesday less than 72 hours after the U.S. government warned of an imminent Russian attack on eastern Ukraine, relocated its Ukrainian Embassy close to the Polish border, and called on its citizens to leave the country as soon as possible.

Fears of a Russian attack, the impact of sanctions on the global economy, and surging commodity prices hit broader markets hard earlier this week, pulling both the Dow Jones Industrial Average and S&P 500 Index into negative territory, and lifting gold prices to the highest levels in eight months, while sparking an oil price rally that took U.S. crude past $95 for the first time since 2014.

In early trading Wednesday, U.S. benchmark advanced more than $1 to near $93.40 bbl, and international crude benchmark Brent for April delivery gained to $94.80 bbl after topping $96 bbl on Monday. NYMEX March RBOB futures added 2.49 cents to $2.6940 gallon, and the front-month ULSD contract rallied 2.79 cents to $2.8876 gallon.

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