DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Wednesday's session with sharp gains spurred by risk-on sentiment in financial markets after U.S. President Joe Biden voiced confidence that an agreement on the debt ceiling would be reached in coming days, easing concerns about a potential default and the cascading impact on energy demand.

At the conclusion of a meeting between Biden and congressional leaders on Tuesday, House Speaker Kevin McCarthy said, "We now have a structure to come to a conclusion" on debt ceiling negotiations, adding that it's "possible to get a deal done by the end of the week."

Wednesday morning, Biden said from the White House that he and the other lawmakers had a "productive" meeting and would likely come to an agreement on a $31.4 trillion debt ceiling. The White House said Biden canceled a second leg of an upcoming G7 trip to Asia to focus on negotiations.

As investors grew increasingly hopeful that there would be a resolution in U.S. debt talks, Dow Jones Industrials rallied more than 350 points to 33,380, and the S&P 500 advanced 1.1%. The risk-on sentiment in financial markets spurred gains in the oil complex, sending front-month West Texas Intermediate futures $1.97 per barrel (bbl) higher to $72.83 per bbl, and the international crude benchmark Brent contract for July delivery settled just a tad below $77 per bbl at $76.96 per bbl, rallying more than $2 per bbl on the session. NYMEX RBOB June futures advanced $0.0901 to $2.5692 per gallon, while ULSD June futures firmed to $2.4226 per gallon, up $0.0587.

Wednesday's higher settlements in the oil complex came despite a mostly bearish inventory report released Wednesday morning from the U.S. Energy Information Administration showing commercial crude oil inventories climbed 5 million bbl last week compared with estimates for an 800,000 bbl drawdown. The stock build was realized, in part, due to a 2.4-million-bbl transfer of crude oil from the nation's Strategic Petroleum Reserve to the commercial side last week, according to data released by the Department of Energy. Oil stored at Cushing, Oklahoma, the delivery point for WTI, increased by 1.5 million bbl. U.S. crude oil production, meanwhile, fell 100,000 barrels per day (bpd) last week to 12.2 million bpd. The U.S. refining utilization rate jumped 1% from the previous week to 92%, with refiners processing 245,000 bpd more crude than the previous week's average.

In the gasoline complex, commercial stockpiles declined 1.4 million bbl to 218.3 million bbl, close to analyst expectations for a 1.3-million-bbl decrease to have occurred. Demand for the ground transportation fuel decreased 395,000 bpd to 8.908 million bpd, bringing the four-week average to 9.1 million bpd or 2.9% above last year's weekly demand rate. Distillate fuel inventories increased slightly to 106.2 million bbl and now stand about 16% below the five-year average. Distillate fuel consumption declined 299,000 bpd to 3.736 million bpd.

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