DTN Oil

CRANBURY, N.J. (DTN) -- Oil futures closest to expiration on the New York Mercantile Exchange and Brent on the Intercontinental Exchange added to gains early Wednesday following bullish industry statistics released late Tuesday showing weekly drawdowns from crude and products inventories, with the international crude benchmark nearing $90 barrel (bbl) while the gasoline contract traded at a seven-month high overnight.

Tuesday afternoon, the American Petroleum Institute reported larger stock draws than the market anticipated, with commercial crude inventory drawn down 2.286 million during the week ended March 29. Gasoline inventory declined 1.461 million bbl during the final week of March, and distillate fuel supply was drawn down a sizable 2.548 million bbl.

The Energy Information Administration at 10:30 a.m. EDT will publish official government statistics. If the API data is confirmed, it suggests improving fuel demand as most refineries are expected to have exited seasonal maintenance programs and are producing more product.

Key for distillate fuel demand is if manufacturing activity in the United States is indeed picking up following 16 months of contraction. On Monday, the Institute of Supply Management released their manufacturing index for March showing growth in factory activity for the first time since September 2022.

ISM will issue its service sector index at 10 a.m. EDT, with the market expecting modest growth in March from February. U.S. consumers continue to spend, with the Bureau of Economic Analysis' most recent report for February showing personal expenditures up $145.5 billion from January. Historically, consumer spending is a good gauge for gasoline consumption, while the service sector accounts for the majority of U.S. economic growth. On Monday, the Atlanta Federal Reserve Bank's GDPNow model estimated first quarter U.S. gross domestic product growth of 2.8%, up from 2.3% on Friday, March 29.

The early Wednesday advance adds to Tuesday's rally sparked by intensifying hostilities in the Middle East while Monday night Ukraine attacked an oil refinery 1,000 miles inside Russia with a drone, with Kyiv demonstrating its ability to attack Russian infrastructure far from the front lines. Reports indicate Russia has reduced exports of diesel fuel, which follows a string of Ukrainian drone attacks on Russian oil refineries in late March.

Also on Monday, Israel bombed what is described as an Iranian diplomatic building in Syria that killed several members of Iran's Islamic Revolutionary Guard Corps, including its commander, General Mohammad Reza Zahedi, according to the Wall Street Journal. The attack several experts say moves the shadow war between Israel and Iran into a more direct conflict, with Iran vowing revenge. To date, Iran has used proxies, including Hezbollah, to menace Israel on its northern border. The heightened tensions are realized six months into a war between Israel and Hamas in Gaza, with Hamas also financed by Iran. Houthi rebels in Yemen, which receive arms and funding from Iran, have launched more than one hundred attacks on commercial shipping in the Red Sea since October in support of Hamas, who on Oct. 7 savagely attacked more than 1,000 Israeli citizens. The chance of the Middle East conflicts expanding and disrupting oil supply increased this week, lifting oil prices.

Near 7:45 a.m. ED, ICE June Brent futures were up $0.75 at $89.67 bbl, near an $89.73 five-month high on the spot continuous chart. NYMEX May West Texas Intermediate futures were up a like amount at $85.90 bbl, also trading at a five-month high on a spot continuous basis.

NYMEX May RBOB futures traded at a $2.7793 gallon seven-month high on the spot continuous chart overnight, trading just shy of the high, up $0.0185 gallon. NYMEX May ULSD futures are up $0.0314 at $2.7433 gallon following Tuesday's $0.0848 rally.

Brian L. Milne can be reached at brian.milne@dtn.com