Oil prices rose more than 1% on Wednesday and extended third session gains after official US data showed fuel demand climbed to its highest level since the start of the COVID-19 pandemic.
Brent crude rose $1.20, or 1.7%, to settle at $72.25 a barrel. West Texas Intermediate (WTI) crude was up 82 cents, or 1.2%, to close at $68.36 a barrel.
US gasoline futures, which reached $2,3026 per gallon during the session and their highest level since Aug. 12, ultimately rose 5.5% to $2,3008 per gallon.
The nearly 10% rally in both Brent and WTI over the last three sessions has largely erased last week’s decline triggered by a resurgence in COVID-19 cases.
The four-week average for U.S. aggregate supply, which represents fuel demand, rose to nearly 21 million barrels per day, the highest since March 2020, when governments first began enforcing pandemic-related restrictions widely, according to U.S. Energy Information Administration data.
Refineries increased production capacity to 92.4%, the highest since late June, helping US crude inventories drop to the lowest level since January 2020.
The EIA said last week that crude oil inventories fell by 3 million barrels to 432.6 million barrels, the lowest level since January 2020.
U.S. gasoline inventories fell 2.2 million barrels, beating analysts’ expectations for a decline of 1.6 million barrels.
The price increases also came as a result of a fire on an oil rig in Mexico on Sunday and its supply dropping by more than 400,000 barrels per day. Mexico’s state oil company said it expects to restart production by August 30.
As global economic normalization continues and OPEC remains disciplined about crude oil supply, oil seems to have a clear path, although volatility is likely to continue. With this wind, Brent is likely to rise to $75 a barrel by December.
China reported 20 new confirmed cases of coronavirus on August 24, meaning 15 cases less considering 35 the day before. This decline in China, the world’s largest oil importer, is a sign that the spread of infections is slowing.
However, the coronavirus pandemic still continues to cause concern worldwide, and especially among investors. Many countries are struggling with the spread of the Delta variant. COVID-19 infections in Sydney set a record Wednesday despite a two-month quarantine in the city.
