WTI continues to move sideways near $110 with focus on rising US demand as peak driving season nears

• WTI is going sideways near the $110 level amid a lack of catalysts, where it has spent the last three days.
• Rising fuel demand in the US as peak driving season approaches is being cited as supportive.
• Focus is on the latest weekly US crude oil inventory report at 1430GMT for further insight into current US demand.

Amid a subdued tone to macro trading conditions with markets in wait and see mode ahead of commentary from Fed Vice Chair Lael Brainard and the release of the minutes of this month’s Fed meeting, and amid a lack of any notable fundamental catalysts to spur volatility, oil prices are going sideways. Front-month WTI futures were last trading just to the north of $110, having spent the last three sessions pivoting either side of this level. That leaves prices around the midpoint of recent $105-$110 ranges.

Market commentators continue to cite expectations for rising fuel demand in key markets (like the US) as peak driving season approaches as supportive of prices. Weekly US inventory data coming up at 1430GMT is expected to show another approximately 640K barrel drop in gasoline inventories following last week’s 4.8M barrel drop. That would mean that gasoline inventories have only in one week out of the 16 weeks since early February.

“Just ahead of the summer driving season, U.S. gasoline stocks find themselves at their seasonally lowest level since 2014,” analysts at Commerzbank said on Wednesday. That drop in US gasoline inventories goes hand in hand with the recent sharp rise in US gasoline prices and reflects increasingly tight global market conditions as OPEC nations lift output only very slowly, and as Russian oil production struggles in the face of tough sanctions on the country following its invasion of Ukraine.

Those sanctions on Russia look set to tighten in the weeks ahead. The EU hopes to agree on a plan to embargo Russian oil imports over the course of the next few months ahead of next week’s EU Council Summit meeting, EU Council President Charles Michel said on Wednesday. The US has already banned all Russian imports, while the UK will end imports by the end of the year. As a result, many global oil buyers have been “self-sanctioning” (i.e. avoiding Russian oil even in the absence of sanctions) out of fear that new sanctions may come.

A Reuters report on Wednesday said that Russian oil stored in vessels at seas has hit a record high as the nation struggles to find buyers. Russian oil output is expected to have dropped by as much as 3M barrels per day as of this month versus the country’s pre-invasion of Ukraine levels.