West Texas Intermediate crude climbed to a one-month high as a government report showed that rising gasoline use reduced inventories of the fuel. WTI’s discount to Brent shrank to the narrowest since September.
Prices gained 1 percent in New York. Gasoline demand jumped to a three-month high in the four weeks ended April 4 as supplies dropped to the least since November, the Energy Information Administration said. Crude extended gains as U.S. equities advanced and the dollar weakened after minutes of the last Federal Reserve meeting eased concern about the timing of future interest rate increases.
“Gasoline demand is picking up, and the drop in gasoline inventories is helping the overall market,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “Oil rallied after the Fed minutes with a weakening dollar and stronger equities.”
WTI for May delivery rose $1.04 to $103.60 a barrel on the New York Mercantile Exchange, the highest settlement since March 3. The volume of all futures traded was 59 percent above the 100-day average at 4:02 p.m.
Brent for May settlement gained 31 cents, or 0.3 percent, to $107.98 a barrel on the London-based ICE Futures Europe exchange. Volume was 13 percent above the 100-day average. The European benchmark grade was at a premium of $4.38 to WTI, the weakest since Sept. 19.
Gasoline demand averaged 8.81 million barrels in the four weeks ended April 4, the highest level since Jan. 3, the EIA, the Energy Department’s statistical arm, said. Inventories of the fuel dropped to 210.4 million, the least since Nov. 15.
Gasoline for May delivery advanced 2.83 cents, or 1 percent, to end the session at $3.0084 a gallon on the Nymex, also the highest since March 3.
“Gasoline looks really well supported,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “You have lower inventories and higher demand. Gasoline is helping the energy complex.”
Supplies at Cushing, Oklahoma, the delivery point for WTI futures, increased 345,000 barrels to 27.6 million after dropping to a four-year low the previous week. Stockpiles had decreased since the southern link of TransCanada Corp. (TRP)’s Keystone XL pipeline started shipping Cushing crude to the Gulf Coast in January.
Total U.S. crude stockpiles grew 4.03 million barrels last week, more than five times as much as analysts forecast, to a four-month high of 384.1 million barrels. Imports gained 481,000 barrels a day, following a drop of 786,000 barrels in the previous week because the Houston Ship Channel was shut.
“Given the need to catch up in the aftermath of the Houston Ship Channel closure, the build had to be expected,” Finlon said. “I expect the build in Cushing stocks to be temporary.”
WTI also increased as the dollar weakened as much as 0.4 percent against the euro to $1.3858 per euro, and the Standard & Poor’s 500 Index gained 1.1 percent.
Several Fed policy makers said a rise in their median projection for the main interest rate exaggerated the likely speed of tightening, according to the minutes of the March 18-19 Federal Open Market Committee meeting.
Implied volatility for at-the-money WTI options expiring in June was 16.7 percent, down from 17.2 yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 716,149 contracts at 4:02 p.m. It totaled 741,628 contracts yesterday, 38 percent above the three-month average. Open interest was 1.66 million contracts.
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