Oil prices steady near 4-mth high after Russia attacks, strong US fuel draws

Investing.com-- Oil prices rose slightly in Asian trade on Thursday, staying near four-month highs after a substantial draw in U.S. gasoline inventories and debilitating attacks on a key Russian fuel refinery pointed to tighter fuel supplies. 

The two factors saw crude prices shoot up more than 3% on Wednesday, with Brent and West Texas Intermediate crude futures settling at their highest levels since late-November.

Brent oil futures expiring in May rose 0.2% to $84.21 a barrel, while WTI futures rose 0.2% to $79.44 a barrel by 21:48 ET (01:48 GMT). 

But despite strong gains, crude prices still remained within a $75 to $85 a barrel trading range established in recent months. More gains in oil prices were held back by concerns over weak Chinese demand and the prospect of higher-for-longer interest rates. 

Russian fuel refinery attacks support oil prices 

A key point of support for oil prices was Ukranian drone attacks on a major Russian fuel refinery, which reportedly put the facility out of commission.

The move is expected to limit Russia’s fuel output, and also comes amid already tight gasoline markets in the country.

Russia had earlier this month enacted a six-month ban on fuel exports- a move that is expected to substantially tighten fuel markets in swathes of Asia. 

Increased clashes with Ukraine also point to elevated geopolitical risks to oil markets, which are already grappling with the Israel-Hamas war. 

US inventory draws signal improving demand 

An unexpected draw in U.S. oil and gasoline inventories indicated that demand in the world’s largest fuel consumer was picking up from a winter lull, especially as more refineries resumed operations after an extended winter break.

Official data showed that crude inventories shrank by about 1.5 million barrels in the Week to March 8, against expectations for a build of 0.9 million barrels.

But the kicker was a 5.7 million barrel draw in gasoline stocks, which was much more than expectations for a 1.9 million draw and marked a fifth week of outsized draws in the past six weeks. 

The inventory readings signaled tightening oil supplies in the U.S., even as the country produced crude at record-high rates and was forecast to increase production this year. 

Wednesday’s gains in crude also came as the Organization of Petroleum Exporting Countries (OPEC) said it expected global oil demand to improve in 2024 and 2025.

But other data showed that not all members of the cartel were committing to the group’s lower production targets, which are in place until end-June. 

Crude prices were on edge before more cues on U.S. inflation, from producer price index and retail sales data due later in the day. A monthly report from the International Energy Administration is also on tap later in the day.