DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange rallied in early morning trade Wednesday. Gains were led by the front-month RBOB contract after the American Petroleum Institute reported gasoline stockpiles in the United States fell by a larger-than-expected margin during the week ended May 20, pushing inventories well below the five-year average ahead of the start of the peak driving season in the United States.

The American Petroleum Institute reported U.S. stockpiles tumbled 4.223 million barrels (bbl) in the week ended May 20, more than three times calls for a draw of 1.2 million bbl.

Domestic gasoline stockpiles have fallen more 8 million bbl so far this month. Should the draw realize, this will push inventories some 10% below five-year average for this time of the year. API data also showed distillate inventories fell 949,000 bbl, missing estimates for a gain 200,000 bbl. Some analysts suggest gasoline stockpiles are nearing a critically a low level ahead of the start of Memorial Day that historically marks the beginning of the peak summer driving season in the United States. There are few signs Americans would steer away from the road this summer despite a historical run-up in gasoline prices that reached $4 gallon in early March and have since continued to advance. AAA Travel projects that this year's driving demand would match the pre-pandemic level in 2017 amid pent-up demand for vacations. Reflecting expectations for strong gasoline demand this summer, RBOB futures registered an all-time high $4.0640 gallon on May 16 as traders simultaneously grew concerned over low inventory levels. Commercial crude-oil stockpiles unexpectedly gained 567,000 bbl last week versus calls for a drop of 600,000 bbl. Stocks at the Cushing, Oklahoma, hub, the delivery point for the New York Mercantile Exchange West Texas Intermediate contract, fell 731,000 bbl in the week profiled.

Traders next await the release of the U.S. weekly inventory report from the U.S. Energy Information Administration on tap for 10:30 a.m. EDT.

In financial markets, U.S. equity futures edged lower early Wednesday, while the dollar bounced from a one-month low 101.870 as markets proceed cautiously ahead of the release of minutes from the Federal Reserve's April policy meeting later in the session. Many market watchers have become worried that the Fed's plan for aggressive monetary tightening could tip the U.S. economy into recession. A disappointing report Tuesday showing U.S. new home sales decreased 16.6% to an annualized 591,000 pace, which is the weakest pace since April 2020, could be a sign that Fed interest rates increases are already slowing the economy. The figure fell well short of estimates for 749,000 new homes sales.

Near 7.30 a.m. EDT, July WTI futures rallied $1.27 to $111.01 bbl, and international crude benchmark Brent contract for July delivery advanced $0.98 to $114.53 bbl. NYMEX June RBOB gained 6.90 cents to $3.8800 gallon, while front-month ULSD edged 6.43 cents higher to $3.8461 gallon.

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