WTI rides higher in Asia extending gains from New York trade

• WTI edges higher in the Asian session as inventories fall. 
• OPEC production continues to underperform benchmarks materially.

At 110.93, West Texas Intermediate (WTI) crude oil is higher by some 0.22% and has drifted up from a low of $110.65 in the Asian session so far. Futures closed higher on Wednesday following a report showing US gasoline inventories fell last week, ahead of the start of the summer driving season on the Memorial Day weekend. WTI crude for July delivery closed up US$0.56 to US$110.33 per barrel.

Inventories continue to draw down and US stockpiles fell by 1,019kbbl last week, according to Energy Information Administration data. Gasoline inventories fell by 0.5 million barrels, less than the 4.22-million drop reported Tuesday by the American Petroleum Institute but still a drop ahead of high summer demand for the fuel.

Analysts at ANZ Bank explained that the fall was even greater than Cushing, the pricing point for WTI futures. ''At the same time, exports soared, and throughput at Gulf Coast refiners hit its highest level since January 2020. This helped slow down the drawdown in fuel inventories, providing some relief for tight markets. The EIA report also showed sales from the strategic reserve remain strong, with the stockpile falling 5,971kbbls last week. This takes the SPR to its lowest level since September 1987.''

The analysts also explained that the market remains on edge about the pending European sanctions on Russian oil. At the same time, while lockdowns in China weighed on growth expectations, mobility in the Middle Kingdom has been on an upward trend, suggesting oil markets have moved beyond peak demand concerns, analysts at TD Securities argued.

''Most importantly, the persistent supply risks in the complex continue to drive tighter fundamentals, and remain the most dominant driver for energy markets.''

Meanwhile, OPEC production continues to underperform benchmarks materially. ''In this context, despite macroeconomic angst, crude oil markets may be shaping up for another move higher this summer,'' the analysts at TD Securities said.