Oil Steady After Jumping on Stockpile Draw

(Bloomberg) -- Oil was steady in Asia after jumping almost 5% on Wednesday as U.S. stockpiles data added to signs the demand outlook is improving.

Futures in New York traded near $63 a barrel after closing higher for a third day, the longest run of gains in more than a month. U.S. crude inventories dropped the most in almost two months last week, while a gauge of gasoline demand ticked higher for a seventh straight week. The bullish data followed upbeat assessments by OPEC and the International Energy Agency.

Oil had been stuck near $60 a barrel after a rally faltered in mid-March amid a resurgence in virus cases in some regions. While the IEA sees a temporary lull in the market due to the renewed outbreaks, it followed OPEC in boosting its demand estimates for this year as the economy rebounds from the pandemic.

The market will soon have to deal with more supply, however. OPEC+ and U.S. producers are set to start adding extra barrels from May. Another wildcard is Iran, which is seeking to revive a 2015 nuclear deal and have U.S. sanctions removed to lift crude exports, but progress on that remains uncertain.

“Consolidation is likely on the cards as crude may have overshot yesterday,” said Vandana Hari, founder of Vanda Insights in Singapore. “The spike appears to reflect a selective view of a multi-speed world. Europe is still in the throes of Covid’s constraints and India is plunging into a deadlier second wave.”

Prices

West Texas Intermediate for May delivery slipped 4 cents to $63.11 a barrel on the New York Mercantile Exchange at 7:30 a.m. London time after surging 4.9% on Wednesday. Brent for June settlement rose 3 cents to $66.61 on the ICE Futures Europe exchange after jumping 4.6% in the previous session to $66.58, the highest close since March 17.

The prompt timespread for Brent was 43 cents a barrel in backwardation -- where near-dated contracts are more expensive than later-dated ones. That compares with 49 cents a week earlier.

U.S. crude stockpiles declined by 5.89 million barrels last week, according to Energy Information Administration data. Gasoline inventories increased for a second week, while distillate supplies -- a category that includes diesel -- dropped for the first time since early March.

The global recovery from the pandemic is looking uneven, however. The U.S. and China are seeing higher rates of fuel consumption, but India is renewing partial lockdowns amid record virus cases and a shortage of vaccines. South Korea and Japan are also seeing rising infections.

Other oil-market news:

Saudi Arabia’s oil facilities were targeted with drones and missiles for the second time in a week, with Yemen’s Houthi rebels claiming an attack on the south-western refinery town of Jazan. U.S. shale producers risk another oil-price war with OPEC and its allies if they resume the breakneck production growth of the last decade, according to Pioneer Natural Resources Co. West Africa’s oil exports due for loading next month have struggled to sell, due to weak demand from the region’s regular customers in Asia and Europe and tougher competition from rival suppliers.

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