Oil up 3rd day in row on large fuel drawdown, dollar drop ahead of Fed

By Barani Krishnan

Investing.com -- Oil prices overcame a weak start to settle up for a third straight day on Wednesday, helped by the U.S. government’s report of a larger-than-expected drawdown from fuel stockpiles and the dollar’s continued tumble ahead of the Federal Reserve’s latest decision on interest rates.

New York-traded West Texas Intermediate, or WTI, crude settled up $1.23, or 1.8%, at $70.90 per barrel. 

With the latest rise, the U.S. crude benchmark has gained more than 5% since the start of the week, returning to the key $70 perch and overwriting about half of last week’s near 10% plunge that accounted for oil’s worst week since the height of the coronavirus pandemic in April 2020. Just on Monday, WTI sank to $64.12, its lowest since December 2021.

London-traded Brent crude finished up $1.37, or 1.8%, at $76.69 per barrel, adding to its about 3% gain over the past two sessions. The global crude benchmark plumbed a 15-month low of $70.12 on Monday, after finishing last week down 13%

The Dollar Index fell to a more than one-week low of 102.627 against a basket of currencies, sliding for a ninth time in 10 sessions and losing 2.7% in the process. That naturally boosted demand for commodities denominated in the greenback, including crude.

Oil’s rebound was also accelerated Wednesday by data showing larger-than-expected fuel demand for last week amid fair weather that appeared to encourage more driving.

Gasoline inventories saw a drawdown of  6.399 million barrels during the week ended March 17, more than triple the drop of 2.061M barrels of gasoline noted in the prior week to March 10, the U.S. Energy Information Information, or EIA, said in its Weekly Petroleum Status Report. 

Automotive fuel gasoline is the No. 1 U.S. fuel product.

Analysts tracked by Investing.com media had only expected the EIA to report a gasoline stockpile drop of 1.677M barrels on the average for last week. 

With  distillate stockpiles, the EIA reported a 3.313M barrel draw, against expectations for a drop of 1.5M and versus the prior week’s deficit of 2.537M. Distillates, which are refined into heating oil, diesel for trucks, buses, trains and ships and fuel for jets, are often the strongest demand component of the U.S. petroleum complex.

The larger-than-expected drawdown in fuels came on the back of benign weather in the United States last week as the end of an unusually warm winter ushered in even higher spring temperatures that encouraged more Americans to drive.

Despite the higher fuel consumption, crude oil balances in storage rose for a second week in a row, the EIA report showed, suggesting slower-than-expected refinery processing of crude. Refineries operated at 88.6% of their operable capacity last week, the EIA said, versus the 90% and above norm for this time of year.

Crude stockpiles rose by 1.117M barrels during the week ended March 17. In the previous week to March 10, there was a build of 1.55M barrels.

Except for one week, crude inventories have risen over the past 13 weeks, resulting in a net build of more than 60M barrels since the start of this year.