Oil set for weekly gains as gasoline prices extend push into record territory

Oil futures rose Friday to trade near three-month highs and were on track for a strong weekly gain as demand for fuel pushed gasoline futures further into record territory.

Price action
  • West Texas Intermediate crude for July delivery


    rose $1.01, or 0.8%, to $122.52 a barrel on the New York Mercantile Exchange, headed for a 3.1% weekly rise.

  • August Brent crude

    the global benchmark, was up $1.12, or 0.9%, at $124.19 a barrel on ICE Futures Europe, leaving it on track for a weekly gain of 3.7%.

  • Back on Nymex, July gasoline
    rose 0.7% to $4.3064 a gallon, after ending Thursday at a record. July heating oil
    rose 1.8% to $4.4812 a gallon.

  • July natural-gas futures
    were up 0.5% at $9.012 per million British thermal units.

Market drivers

Oil has rallied this week on continued strength in fuel demand. Data earlier this week from the Energy Information Administration showed a further fall in gasoline inventories, signaling a further increase in demand as summer driving season moves into full swing despite the average U.S. pump price expected to hit $5 a gallon for the first time.

Gasoline inventories at a little over 218 million barrels “are closer to levels we usually see at the end of driving season, not at the beginning,” said Warren Patterson, head of commodities strategy at ING, in a note.

Investors continue to track developments in China, where parts of Beijing and Shanghai went back on lockdown after previously easing COVID-19 restrictions, news reports said.

The oil complex has accepted China’s “stop and start economics,” but crude dould face headwinds from a strong U.S. dollar amid continued stagflation concerns, said Stephen Innes, managing partner at SPI Asset Management.

Innes said that while continued releases from strategic reserves and an increase in OPEC+ production quotas have done little to cool off oil, bulls think U.S. policy makers could grow increasingly desperate ahead of the November elections, potentially even allowing Venezuela to export to Europe, “which could be a price capper.”

“But the clearest read-through for oil markets, regardless of what stock markets are doing, is as we head deeper into the U.S. summer driving season, tight oil and product markets should still support oil,” he said.

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