DTN Oil

WASHINGTON (DTN) -- Reversing earlier losses, oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Wednesday's session with gains between 1% and 2%. The advances come after the weekly inventory report from the Energy Information Administration showed U.S. crude oil exports surged to a record-high 5.6 million barrels per day at the end of February, while domestic demand for gasoline improved to a two-month high 9.1 million barrels per day (bpd) amid easing prices at the pump and unseasonably warm winter weather.

More evidence of surging demand for U.S. oil barrels on the global market could be found in EIA's inventory report for the final week of February, showing the total U.S. oil and petroleum products exports jumped to 11.1 million bpd.

The volume of U.S crude and petroleum products being exported to Europe has risen sharply in recent months and looks set to remain high as the region deals with a shortage of Russian crude oil following an EU ban on Russian crude imports. Total U.S crude exports to Europe reached 1.75 million bpd at the start of 2023, a rise of around 75% over 2021 levels.

The jump in oil exports comes as demand for refined fuels remained remarkably weak at the start of the year but showed nascent signs of recovery. For instance, U.S. gasoline consumption topped 9 million bpd for the first time this year last week, while 202,000 bpd above the same week a year ago. A combination of easing prices at the pump and mild weather could have contributed to an unseasonal jump in gasoline demand.

On the bearish side, U.S. commercial crude inventories still increased for the tenth consecutive week through the end of February, building by almost 60 million barrels (bbl) since the start of the year. The rate of the builds, however, slowed to 1.2 million bbl, down from 7.64 million bbl and 16.284 million bbl in the second and third weeks of February. At 480.2 million bbl, nationwide crude inventories now stand about 9% above the five-year average.

Internationally, China released the first set of post-lockdown economic data overnight showing its manufacturing sector expanded at the fastest pace since 2011. China's manufacturing Purchasing Managers Index, a gauge of industrial activity, grew for the first time in six months, jumping to 56.7 reading from the prior month's 49.8. A reading above 50 indicates an expansion of the overall economic trend compared to the previous month, while a reading below 50 represents a contraction. New orders expanded for the first time in seven months, and at the fastest pace since May 2021, while employment climbed for the first time in nearly a year. Overall, February data suggests China's economy is gathering momentum after the lifting of COVID-19 restrictions followed by initial surge in infections.

"In February, the economic stabilization policy measures further took effect, coupled with the epidemic's impact receding and other favorable factors, the speed of enterprises to resume production quickened," said NBS statistician Zhao Qinghe.

However, Qinghe also warned the problem of insufficient market demand is still prominent, while the foundation of China's economic recovery still needs to be strengthened, and the subsequent trend of the purchasing managers' index needs to be further observed.

Goldman Sachs estimated that China's oil demand is still roughly 1.6 million bpd below the trend. The revision of this trend could boost oil prices by $15 bbl in the second half of the year, with several forecasting agencies expecting global supply and demand balances to tighten this Spring.

At settlement, NYMEX West Texas Intermediate April contract advanced $0.64 to $77.69 per bbl, while international crude benchmark Brent crude gained to $84.31 per bbl, up $0.86 per bbl on a session. NYMEX RBOB April futures rallied $0.0328 to $2.6748 per gallon, and ULSD April futures gained $0.0682 for a $2.8738-per-gallon settlement.

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