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U.S. gasoline futures were in the driver’s seat Thursday, with the front-month contract jumping to its highest close in 2 1/2 years, as the American crude oil benchmark closed sharply higher.
Brent crude, the global benchmark, notched its highest close since May 2019, finishing just shy of the $70-a-barrel level.
Analysts attributed the move to follow-through buying for both commodities after U.S. government data on Wednesday showed gasoline inventories fell 11.9 million barrels last week, even as crude supplies rose by more than 21 million barrels. The swings were attributed to last month’s deep freeze, which closed a number of Texas refineries.
“Considering the fact that crude oil storage has increased exponentially in recent weeks from the freeze in, it is obvious that gasoline is engine of this runaway train,” said Robert Yawger, director of energy futures at Mizuho Securities, in a note.
April gasoline futures RB00, +2.87% RBJ21, +2.87% rose 5.85 cents, or 2.8%, to $2.138 a gallon on the New York Mercantile Exchange, the highest close for a front-month contract since Aug. 31, 2018, according to Dow Jones Market Data.
West Texas Intermediate crude for April delivery CL.1, +2.58% CLJ21, +2.58% rose $1.58, or 2.5%, to finish at $66.02 a barrel on Nymex. May Brent crude BRN00, +0.16% BRNK21, +0.16%, the global benchmark, jumped $1.73, or 2.6%, to settle at $69.63 a barrel on ICE Futures Europe, the highest close since May 28, 2019.
Crude was also buoyed by new projections from the Organization of the Petroleum Exporting Countries.
“Oil is up on the session as OPEC lifted its demand forecast for 2021…The energy market is also being assisted by the optimism circulating from the $1.9 trillion stimulus story,” said David Madden, market analyst at CMC Markets, referring to the COVID relief package signed into law by President Joe Biden.
In its monthly report, OPEC said it sees demand growth of 5.89 million barrels a day this year, compared with a previous estimate of 5.79 million barrels a day, bringing total world demand to an average to 96.27 million barrels a day.
But the gasoline picture is likely to remain in the spotlight as driving season approaches, analysts said.
“The fundamental set-up for summer gasoline is the most bullish in nearly a decade,” said Michael Tran, commodity strategist at RBC Capital Markets, in a note.
“U.S. inventories are near 10 year lows, U.S. retail gasoline prices are already at the highest point in over five years on a seasonally adjusted basis, and the Nymex gasoline crack spread is already trading at pre-COVID levels,” Tran said, in a note. The crack spread is the price difference between products and crude oil.
Tran outlined a process that could translate into support for crude prices into the summer and beyond. A pickup in driving activity will further tighten gasoline inventories, making crack spreads increasingly economic, he said, sparking a rebound in refinery runs as crude demand rises.
Crude inventories will likely fall considerably through the summer, he said, a sequence that should support prices for WTI crude “this summer and likely beyond,” he said.
April heating oil HOJ21, +2.31% jumped 4.21 cents, or 2.2%, to finish at $1.9594 a gallon.
April natural-gas futures NGJ21, -1.04% fell 2.4 cents, or 0.9%, to close at $2.6680 per million British thermal units. The EIA said natural gas in storage fell by 52 billion cubic feet last week. A survey of analysts by S&P Global Platts found an average estimate for a withdrawal of 65 billion cubic feet.
