Oil Futures Climb to Near 2024 Highs on Demand Optimism

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled Wednesday's session near the highest level so far this year. The gains followed the weekly inventory report from the U.S. Energy Information Administration showing domestic fuel consumption rebounded sharply last week, suggesting driving and commercial demand is picking up momentum heading into spring.

Additionally, Saudi Aramco's decision to lift official selling prices for April crude shipments into Asia -- its top market, further sparked global demand optimism.

The prompt-month WTI contract settled above the key 200-day moving average level on Wednesday, snapping a two-day losing streak as traders upped their bets for strong demand growth over the second quarter. Wednesday's weekly EIA inventory report showed U.S. gasoline consumption jumped 546,000 barrels per day (bpd) from the previous week to 9.013 million bpd -- the highest levels since mid-December 2023, which marked one of the busiest holiday travel seasons in post-pandemic years. The Federal Reserve Bank of St. Louis estimates that the 12-month moving average total vehicle miles traveled ending in December 2023 nearly matched its pre-pandemic level of February 2020.

In the diesel complex consumption also rebounded, climbing above 4 million bpd for the first time this year, up 538,000 bpd from the previous week's average. On a four-week average basis, U.S. distillate demand has fallen in line with a year ago and remains 14.4% below 2022 levels for the seasonal period and 7% below 2019 levels.

U.S. total oil and petroleum products stockpiles tumbled 5.5 million bpd during the week ended March 1 as refinery runs rebounded sharpy following a heavy maintenance season.

Distillate fuel oil stocks fell 4.1 million barrels (bbl) in the week, leaving stocks 10% below the five-year average level. Gasoline stocks fell 4.5 million bbl, pressuring inventories to 2% below the five-year average level.

On the crude side, commercial stockpiles increased for the sixth consecutive week through March 1, up 1.4 million bbl from the previous week to 448.5 million bbl. U.S. refinery inputs averaged 15.3 million bpd last week, which was 595,000 bpd more than the previous week's average. Domestic refiners sharply raised run rates 3.4% in the reviewed week to 84.9% of capacity compared with expectations for a 1% gain.

Domestic crude oil production unexpectedly decreased by 100,000 bpd from a record-high 13.3 million bpd, lending further price support for the oil complex.

Internationally, Saudi state-owned oil company Aramco raised the April official selling price for its flagship Arab Light crude to Asian customers by $0.20 per bbl to $1.70 per bbl over the Oman/Dubai benchmark. Aramco also raised the April OSPs for Arab Extra Light to Asian customers by $0.20 per bbl, and for both Arab Medium and Arab Heavy by $0.30 per bbl compared with the previous month. The price is often considered a barometer for how Saudi Arabia sees the demand outlook.

For Northwest Europe, the Arab Light OSP was reduced by $0.60 per bbl to $0.30 per bbl premium over ICE Brent futures, while Medium was also cut by the same margin to -$0.40 per bbl. Arab Light for April to the U.S. Gulf was set at $4.75 per bbl premium over Argus Sour Crude Index, while Medium was at $5.65 per bbl premium and Heavy at $5.30 per bbl premium, all slightly lower on the month.

At settlement, WTI April futures on NYMEX advanced $0.98 to $79.13 per bbl, and the international crude benchmark Brent contract for May delivery added $0.92 to $82.96 per bbl. NYMEX April RBOB futures rallied $0.0211 to $2.5539 per gallon, and April ULSD futures jumped $0.00568 to $2.6633 per gallon.

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

Liubov Georges