Gasoline rose with crude after German Chancellor Angela Merkel said Europe would move forward with a “tough response” if Russia escalates the crisis over Ukraine, increasing concern that oil supplies may be disrupted.
Futures advanced following Merkel’s remarks that while she hopes to avoid broader sanctions against Russia, that nation “must know that if certain international treaties are violated further, then we will be ready for a tough response.” Russia is the world’s largest energy producer.
“Merkel makes comments and the market goes up,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “The market’s concern is that escalating tensions and sanctions would result in a tit-for-tat response that could impact some supplies of crude oil.”
April-delivery gasoline advanced 2.61 cents, or 0.9 percent, to settle at $2.9089 a gallon on the New York Mercantile Exchange, the first increase in three days. Volume was 6.1 percent below the 100-day average as of 3:33 p.m.
West Texas Intermediate crude for May delivery gained $1.07 to settle at a five-day high of $100.26.
Russia has been consolidating its control over Crimea and massing forces along the border with Ukraine in what has become the most serious confrontation between Moscow and the U.S. since the breakup of the Soviet Union. The U.S. and its allies, including Germany, have threatened to add to sanctions already imposed and decided to boycott what was to have been a Group of Eight summit in Sochi.
U.S. gasoline inventories fell 5.1 million barrels last week to 217.2 million, according to the Energy Information Administration. The decline outpaced the 1.5 million-barrel drop projected in a survey by Bloomberg.
Gasoline demand rose 490,000 barrels to 9 million a day, the most since December.
“It had to be winter-grade gasoline moving out of the terminals,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York. “There’s no way that demand is so good.”
The motor fuel’s crack spread versus May-delivery WTI narrowed 3.7 cents to $21.80 a barrel. Gasoline’s premium to Brent rose 99 cents to $15.03.
The average U.S. pump price was up 0.4 cent to $3.535 a gallon, the highest since Sept. 12, according to data from Heathrow, Florida-based AAA. Drivers are paying 12.3 cents less than a year ago.
Ultra low sulfur diesel for April delivery dropped 0.21 cent to $2.9194 a gallon on volume that was 29 percent below the 100-day average.
Supplies of distillates, including diesel and heating oil, rose 1.56 million barrels in the week ended March 21, the largest increase since Jan. 3. The survey projected a decline of 1.38 million.
Diesel’s crack spread versus West Texas Intermediate narrowed $1.20 a barrel to $22.29. The premium over European benchmark Brent slid 17 cents to $15.52.