Oil Rises as Record Gasoline Demand Allays Shale Boom Worries

(Bloomberg) Oil ended a fickle session on the rise as record demand for gasoline helped ease concerns that increasing crude production from America’s shale fields will worsen a global glut.

Futures closed 0.9 percent higher in New York after disappointing numbers for crude supplies and output sent prices tumbling. U.S. oil stockpiles last week fell by about half the amount analysts had expected, and output rose to the highest since July 2015, Energy Information Administration data showed. But gasoline supplies shrunk and demand rose to a record high.

“The market digested the data and, looking a little bit deeper, it’s showing that demand is actually pretty darn strong and it’s kind of sticking in there, and that’s the reason we’ve come back up,” Michael Loewen, a strategist at Scotiabank in Toronto, said.

Pledges from  Saudi Arabia and other members of the Organization of Petroleum Exporting Countries to reduce crude shipments helped push oil above $50 a barrel in New York for the first time since May this week. The rally faltered as the group’s output climbed in July, led by increases from Libya.

West Texas Intermediate crude for September delivery rose 43 cents to settle at $49.59 a barrel on the New York Mercantile Exchange. Total volume traded was about 20 percent above the 100-day average.

Brent for October settlement added 58 cents to $52.36 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $2.63 to October-delivery WTI.

Supply Situation

U.S. crude stockpiles fell by 1.53 million barrels to 481.9 million, the lowest level since December, the EIA data showed. Analysts surveyed by Bloomberg had estimated a 3.1-million-barrel draw. Crude production increased by 20,000 barrels a day to 9.43 million.

Gasoline supplies dropped 2.52 million barrels to 227.7 million, a seventh weekly decline. Demand for the motor fuel jumped by 21,000 barrels a day to 9.84 million, a record-high. U.S. gross refinery inputs also a hit a record-high level in the week ended July 28.

“The market has been laser-focused on crude stocks and gasoline demand,” Andrew Lebow, senior partner at Commodity Research Group, said by telephone. “What’s amazing is that gasoline stocks are drawing despite the fact that we’re running refineries so hard.”

Oil-market news:

U.S. crude imports from Saudi Arabia increased 26 percent to 1.17 million barrels a day last week, the highest volume since week ended May 26, according to preliminary EIA data for the week ended July 28. The shale surge that’s tied down global oil prices shows no signs of abating as four of the biggest U.S. drillers said they’re not backing away from lofty production targets for 2017. Venezuela’s refineries are said to operate at 43.7 percent capacity, a slight uptick from 43.3 percent on June 21.