Oil prices edged up on Wednesday ahead of data on U.S. oil inventories data, with crude futures supported by tight supplies and recovering fuel demand as China’s top cities relax COVID-19 lockdowns. Brent crude futures for August raised 22 cents, or 0.2%, to $120.79 a barrel after closing at the highest since May 31 on Tuesday.
U.S. West Texas Intermediate crude for July was at $119.65 a barrel, up 24 cents, or 0.2%, after reaching its highest settlement since March 8 on Tuesday. Analysts polled by Reuters expect another drop down of U.S. crude inventories in data for last week although gasoline and distillates stocks could edge higher.
Global crude and oil products supplies remain tight, boosting Asian refiners’ diesel margins to record levels, as Western sanctions hamper exports from major producer Russia. Most refineries worldwide are already running at close to their maximum capacities to meet rising demand from pandemic recovery and replace lost Russian supplies.
JP Morgan analysts estimate that Russia has cut about 500,000 to 700,000 barrels per day of oil products exports as it has been more difficult for Moscow to market its fuel than crude. “Unless new Middle East capacity comes online more quickly than we expect or China decides to lift its products export caps, the shortage of clean products will only get worse as demand for transport fuels picks up during the northern hemisphere summer,” they said.