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James Hyerczyk
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WTI and Brent Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading sharply higher on Tuesday on a more optimistic outlook for demand. The rally is being fueled by the news that more U.S. states eased lockdowns and the European Union sought to attract travelers. This news is helping to offset worries over fuel demand in India as COVID-19 cases soar.

At 12:43 GMT, June WTI crude oil is trading $65.31, up $0.82 or +1.27% and July Brent crude oil is at $68.43, up $0.87 or +1.29%.

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Later today at 20:30 GMT, the American Petroleum Institute (API) will release its weekly inventories report.

Fuel Demand Expected to Pick=Up

Prices are being supported by the prospect of a pick-up in fuel demand in the United States and Europe, as New York state, New Jersey and Connecticut were set to ease pandemic curbs and the European Union planned to open up to more foreign visitors who have been vaccinated, analysts said.

The price action suggests buyers are focused on the successful roll-out of vaccine programs in the U.S. and in other developed countries and not on the surge in COVID-19 cases and deaths in India and Brazil.

In India, the total number of infections so far rose to just short of 20 million, propelled by a 12th straight day of more than 300,000 new cases which is expected to hit fuel demand in the world’s most populous country after China.

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Could See Further Signs of Demand in Today’s API Report

For further signs of rising U.S. oil demand, traders will be watching for reports on crude and product stockpiles from the API.

Five analysts polled by Reuters estimated on average that U.S. crude inventories fell 2.2 million barrels in the week to April 30. Oil inventories rose in the previous two weeks.

The rate of refinery utilization was expected to have increased by 0.5 percentage points last week, from 85.4% of total capacity in the week ended April 23, according to the poll.

“The current strength is led by U.S. gasoline where demand is seen healthy as more motorists take on the roads,” Tamas Varga, analyst at PVM Oil Associates, said.

Daily Outlook

The momentum is clearly to the upside and with buyers betting on the reopening of economies in the U.S. and Europe while downplaying the dire situation in India and elsewhere, we expect to see a near-term test of the March highs.

Although a weak API report late Tuesday could put a dent in the rally later today, it should not derail the rally. Traders know it’s just a matter of time before gasoline and distillate demand surges.

For a look at all of today’s economic events, check out our economic calendar.

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