Oil Prices Extend Gains As Stockpiles Drop

Oil prices extended gains on Wednesday after industry data indicated U.S. crude stocks fell much more than expected last week, reinforcing bullish views on fuel demand in the world's largest economy.

West Texas Intermediate surged 1.2 percent at the open, the most since November 4, Brent neared $70 a barrel, and gasoline futures hit the highest since July 2018. The American Petroleum Institute (API) reported crude supplies fell by 7.69 million barrels last week, according to people familiar with the data. If confirmed by government figures on Wednesday, that would be the largest drop since late January. The API report also showed lower gasoline and distillate inventories.

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Traders are awaiting data from the U.S. Energy Information Administration due at 10:30 a.m. EDT (15:30 WAT) on Wednesday to see if official data shows such a large drawdown.

The rise in oil prices to nearly two-month highs has been supported by COVID-19 vaccine rollouts in the United States and Europe, paving the way for pandemic lockdowns to be lifted and air travel to pick up.

Still, Brent’s pricing patterns reflect the overall bullishness, with near-term contracts above those further out. The prompt time spread was 46 cents a barrel in backwardation compared with 32 cents a month ago. In addition, the December 2021 contract was $4.00 more costly than the same month in 2022.