Oil rose to near the top of its recent trading range after a smaller-than-expected increase in US crude stockpiles added to signs of a tightening physical market.

West Texas Intermediate ended the session above US$78 a barrel after a government report said US crude inventories climbed by 3.51 million barrels, less than what many market watchers expected. Run rates at refineries finally ended a streak of declines for this year and may increase in the coming weeks as facilities restart after a spate of outages and maintenance, boosting crude demand.

Timespreads are signaling a more robust market, and gauges of crude supply balances at the delivery point for U.S. futures at Cushing, Oklahoma, have also soared. Both measures are in a bullish pattern indicative of tight near-term supplies.

“The numbers were not a game-changer for the broader narrative, but did show signs of green shoots and may quell some fears of demand collapse,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth.

Crude is trading near the upper end of this year’s range as investors weigh a subdued demand outlook for top importer China against rising geopolitical risks in the Middle East and disruptions in the Red Sea. In Libya, militias who’ve held sway in the capital for years will begin leaving in April, and traders are monitoring how that may affect oil flows out of the OPEC nation.

In the U.S., minutes from the Federal Reserve’s latest meeting showed most officials remain worried about the risk of cutting borrowing costs too soon, potentially maintaining a headwind for energy demand.

Other data points also helped lend support to markets. The four-week average US demand for jet fuel is near the highest level seasonally since before the pandemic.

Prices:

• WTI for April delivery rose 0.9% to settle at $78.61 a barrel
• Brent for April settlement advanced 0.8% to settle at $83.67 a barrel.