Brent, NYMEX rebound in Asia as investors buy following overnight dip

Category: Commodities

Crude oil rebounded in Asia on Thursday as investors bought on a dip overnight on data that showed the summer driving in the season in the U.S. is not making a major impact on demand.On the New York Mercantile Exchange, WTI crude for August delivery rose 1.27% to $45.32 a barrel. On the Intercontinental Exchange (ICE), Brent crude for September delivery gained 1.10% to $46.77 a barrel.Overnight, crude futures fell sharply on Wednesday, retreating back near two-month lows, as investors shrugged off a modest draw in U.S. oil stockpiles placing a greater focus on the sharpest build in distillate fuel inventories in six months.On Wednesday morning, the U.S. Energy Information Administration (EIA) said in its Weekly Petroleum Status Report that commercial crude inventories decreased by 2.5 million barrels last week for the week ending on July 8. At 521.8 million barrels, U.S. crude oil inventories are still at historically high levels for this time of year. The draw fell in line with analysts' estimates for a decline of 3.0 million barrels, while defying expectations from the American Petroleum Institute of gains of 2.2 million barrels.Notably, gasoline inventories increased by 1.2 million barrels for the week, while distillate fuel stockpiles soared by 4.1 million barrels. The gains were concentrated in the Petroleum Administration for Defense Districts 1 (PADD 1) region, which covers a sizeable area of the East Coast. In PADD 1 alone, distillate fuel inventories rose by 1.172 million last week, representing nearly 30% of the overall gains.While consumers continue to spend at the pump at a steady rate, they haven't traveled enough over the key summer driving season to push gasoline inventories dramatically lower or offset the excessive supply gains.With gasoline stockpiles remaining far above their five-year average, refiners have been forced to halt production leading to seasonally-low levels in the so-called "crack spread". On Wednesday, the RBOB crack spread or the premium of a barrel of gas over a barrel of crude hovered around $12, hitting a five-year low for mid-July. By comparison, the spread stood at $18 two months ago and $28 in the middle of last summer.Without a considerable spike in gasoline demand in the coming weeks, refiners could be forced to remain on the sidelines, further squeezing their margins.