Oil Resumes Advance Alongside Broader Market Rally

Oil resumed gains alongside a broader market rally and after a weekly U.S. inventory report showed signs of an uptick in fuel demand.

Futures in New York surged as much as 4.9% on Wednesday in the wake of stronger U.S. equities. The Energy Information Administration data showed U.S. crude inventories increased last week, while gasoline demand jumped to the highest since November.

Further buoying prices, a record increase in European factory output helped offset the deteriorating near-term consumption picture across the region. Meanwhile, efforts continued to dislodge a giant container ship from the Suez Canal so that traffic may resume in one of the world’s most important waterways.

Oil prices have sunk about 8% in less than two weeks amid softening physical demand and the unwinding of long positions. Still, the washout in length may just be what the market needed before notching further gains. Open interest in U.S. and global benchmark crude futures has declined 6% from last Tuesday, and some traders are seeing a cleaner market that offers more room to go long oil. At the same time, OPEC+ producers will meet in early April to decide on production policy for May.

The Suez Canal is frequently used by tankers transporting crude from the world’s top exporters in the Middle East to customers across Europe. The 400-meter (1,300-foot) long container-ship Ever Given’s hull became wedged lengthways across the canal on Tuesday, causing congestion.

“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.”