Oil jumped more than a dollar on Wednesday after a steep drop in US gasoline stocks fanned concerns the world's top consumer could face a shortfall during the peak summer driving season. Plagued by a string of unplanned outages, US refiners have drawn down inventories to keep up with growing gasoline demand, helping push oil prices up near record peaks.
Global benchmark London Brent crude settled up $1.23 to $76.76 a barrel, after falling 76 cents the previous day. US light crude rose $1.03 to $75.05 a barrel. The US Energy Information Administration surprised the market on Wednesday morning with data showing gasoline stocks dropped 2.3 million barrels last week. Analysts had forecast a 900,000 barrel rise. Crude stocks, which have been near nine-year highs, fell 500,000 barrels as US refinery utilisation rates inched up 0.8 percentage points to 91 percent of capacity.
"There is a triple whammy on gasoline," said Phil Flynn, analyst at Alaron Trading. "Production dropped and imports fell sharply while demand grew stronger. These are mostly opposite of what the market was looking for and so we see prices across the petroleum complex on the rise."
Speculative inflows have contributed to the rise in crude prices, which saw Brent crude on Monday come within 25 cents of its record of $78.65 a barrel set on August 8 last year. Concerns that strong demand will whittle down high inventories in the United States and other consumer nations has lifted prompt-month Brent prices above later months. This typically signals a tighter supply outlook.
"Tightness in crude supply is expected to spread to the US over time, as US refineries emerge from extended maintenance shutdowns," said Fimat USA analyst Antoine Halff.
The price surge over the past month has prompted calls from the International Energy Agency for Opec to relax its current supply restraints. The Organisation of the Petroleum Exporting Countries, which meets next in September, has resisted calls to pump more oil, saying there is enough crude and that high prices reflect tightness in oil products such as gasoline.