Geopolitics Drive Crude Rally

Oil rallied on Wednesday with prices rising around a percent as geopolitical concerns drove the market. Despite forecast strong flows this year, futures pricing implies tight supply with the prompt spread its strongest in three months, but US data continues to show large inventory builds. Delays to Fed easing have made the market nervous though. The USD is little changed despite higher yields.

• WTI is 1.3% higher and has just broken above $78/bbl. It reached a low of $76.32 during European trading but trended higher from there. The benchmark is approaching key short-term resistance at $78.52, February 16 high. Clearance of this level would be a bullish development.
• Brent is up 0.9% to $83.11, close to the intraday high of $83.17. It fell to a low of $81.66 earlier.
• Bloomberg is reporting that there was a US crude inventory build of 7.168mn last week after 8.52mn previously and higher than expected, according to people familiar with the API data. Distillate stocks fell 2.91mn while gasoline rose 415k. The data reflect shortages of refined products which have increased refining margins. The official EIA data is out later today.