(Bloomberg) – Oil closed lower as an increase in fuel inventories in the United States clouded the outlook for a strong rebound in demand during the summer driving season.

Futures in New York ended almost unchanged on Wednesday after a choppy trading session. National gasoline inventories rose by more than 7 million barrels last week, the highest since April 2020, and distillate inventories have also increased, according to a U.S. government report. At the same time, the moving average gasoline demand fell for the first time in a month, despite the country entering its traditional peak fuel season last week.

“Prices have had a good run as we’ve seen some demand pick up,” said Gary Cunningham, Stamford, Conn. Director of Tradition Energy. “But, there hasn’t been a rebound in demand strong enough to push prices much higher than the $ 70 mark.”

Traders focused on rebalancing in the United States, where increased vaccinations and new reopening efforts have placed the country among the harbingers of the global recovery from the pandemic. Signs that such momentum is weakening come as Covid-19 still rages in parts of Asia and Latin America and OPEC + gradually brings production back.

But it will likely take more than a week of growing supplies of refined products to derail the rally of over 40% in oil this year. The Energy Information Administration report also showed crude inventories fell for a third consecutive week to the lowest since mid-February, and refineries operated above the 91% mark for the first time. since January 2020. Elsewhere, the physical market has been strong for Middle Eastern oil as Iranian crude shows few signs of an imminent comeback.

See also: US flooded with gasoline in pandemic ‘lumpy’ rebound

Despite the rise in refined products, “we are now even further below the five-year average on the crude side, creating a bullish pattern for prices,” said Quinn Kiley, portfolio manager at Tortoise, a company that manages about $ 8 billion in energy-related assets. A “delayed resolution to Iran’s nuclear talks is also positive” for the market.

The story continues

Gasoline supplied each week, which the U.S. government uses as a gauge of fuel demand, saw its biggest drop since February, when the country was hit by an unprecedented polar explosion. The four-week moving average for that figure also declined for the first time in a month. Jet fuel demand gauges have weakened, despite optimism surrounding a steady increase in passenger traffic at US airports.

However, the overall pace of the rebound in US consumption relative to the rest of the world has helped lower the discount on WTI futures contracts from its global counterpart to the lowest since November of this week. Market participants say foreign buyers are starting to shy away from Permian crudes, with narrow arbitrage making West Texas oil shipments less attractive.

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