After plunging for six straight sessions on economic growth concerns, oil prices have now gained over 2% on the back of indications that gasoline demand is starting to improve alongside a weekly decline in U.S. gasoline inventories.
At 3:40 p.m. EST on Thursday, Brent crude was trading up 2.26%, at $82.42 per barrel for a $1.82 per barrel gain on the day. WTI was also trading up 2.26%, at $75.62 per barrel.
On Thursday, the Energy Information Administration (EIA) released its weekly inventory report, showing that while crude oil inventory continued to rise for the ninth week in a row, gasoline inventory fell by 1.9 million barrels.
Despite the crude oil inventory build, the gasoline inventory decline is driving oil prices upwards today, with gasoline demand expected to strengthen as we head out of winter and into higher driving seasons.
Also driving oil prices higher are impending cuts to Russian oil output in March, along with indications that cuts could be greater than initially expected.
Earlier in February, Russia announced it would slash production by 500,000 barrels per day in March, in retaliation for Western sanctions. On Wednesday, Reuters reported, citing unnamed sources, that Russia planned to cut crude exports from Western ports by one-quarter in March and April, which would suggest an apparent extension of the 500,000 bpd output cut. There was no official confirmation of the Reuters report.
At the same time, a stronger dollar, along with continual rises in U.S. crude oil inventory, serve as counterbalances to rising prices.
Reuters cites UBS analysts as saying that a reduction in Russian oil output combined with China's reopening should support higher prices despite a stronger dollar.
By Charles Kennedy for Oilprice.com
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