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Oil surged the most since November alongside a broader market rally and as signs of stronger gasoline demand in the U.S. eased concerns around the global economic recovery from the pandemic.

US crude futures jumped more than 6% on Wednesday after prices hit the lowest since early February a day before. Oil rallied in tandem with equities and was also boosted by a US inventory report that showed domestic fuel consumption at the highest in four months. Meanwhile, rescue teams are working to dislodge a giant vessel from the Suez Canal in order to get traffic moving again in one of the world’s most important waterways.

“We’re recovering some of the sell-off that we’ve had in the past week," as “hopes of the economic recovery are renewed," said Gary Cunningham, director at Stamford, Connecticut-based Tradition Energy. “The gasoline demand outlook remains relatively strong" in the US.

Oil faced a tumultuous start to the week amid signs of softening physical demand, renewed pandemic-related lockdowns in Europe and the unwinding of long positions. Key timespreads briefly flipped into contango, a market structure signaling oversupply. The weakness calls into question the role of OPEC+ producers. The group agreed to extended supply curbs into April and are likely to maintain output targets for another month with Saudi Arabia possibly cutting even deeper, according to industry consultant FGE. The producer alliance will meet next week.

“Before these events in Europe, OPEC was clearly on pace to raise production and the market looked willing to accept that," said Rob Thummel, a portfolio manager at Tortoise, a firm that manages roughly $8 billion in energy-related assets. “Now, there’s more uncertainty whether they do that."

The Ever Given, a container ship longer than the Eiffel Tower that ran aground in the southern part of the canal in Egypt, is still stuck across the waterway despite efforts to release it with tugs and excavators. One port agent said earlier that traffic could resume by tomorrow, but the Suez Canal Authority hasn’t given a timetable.

“The impact on the oil market will be fleeting," Kevin Solomon, analyst at brokerage StoneX Group, said of the Suez Canal blockage. “At $70 the futures market had risen too quickly, but with oil at $60 it is an opportunity to buy at much more attractive levels."

In the US, the four-week rolling average for gasoline demand climbed further above 8 million barrels a day last week, the Energy Information Administration report showed. Domestic refineries processed 14.4 million barrels a day of crude, near levels seen before February’s polar blast. Still, US crude inventories rose for a fifth straight week.


This story has been published from a wire agency feed without modifications to the text.

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