Oil steadies after four-day surge as US product markets run hot

Oil traded near the highest close in almost eight weeks on strength in products markets, with US gasoline at unprecedented levels.

West Texas Intermediate was little changed near $114 a barrel in early Asian trading after a four-day advance to the highest close since March 23. With just a couple of weeks to go before the start of the US summer driving season, gasoline surged to a record on rising demand and restrained refining capacity.

WTI, the US oil benchmark, has been rising at a faster pace than Brent in recent sessions, eking out a gain last week while the global marker fell. That’s eroded its usual discount to Brent, and the pair now trade near parity.

Oil has rallied by more than 50 per cent this year in extremely volatile trading as the crisis in Europe tightened supplies, while demand outside of virus-hit China picked up. At the same time, the Organization of Petroleum Exporting Countries and allies including Russia have been restoring output at only a modest pace.

In Europe, a drive by the European Union to ban imports of Russian crude over the Ukraine crisis has been delayed amid opposition from Hungary. Josep Borrell, the bloc’s foreign policy chief, said the foreign ministers had decided to pass the deadlock back to ambassadors for more deliberations.

US crude stockpiles at the key storage hub in Cushing, Oklahoma, have contracted by about a quarter this this year. Holdings at the delivery point for benchmark US futures likely fell by about 2.629 million barrels in the week to May 13, traders said, citing data from Wood Mackenzie Ltd.

Oil markets remain in backwardation, a bullish pattern marked by near-term prices trading above longer-dated ones. Brent’s prompt spread – the difference between its two nearest contracts – was more than $2 a barrel on Tuesday, up from less than 50 cents in late-April.