Oil pries rallied for the second straight day near the highs of their range since early November on a combination of further tensions in the Red Sea, signs of tightness in physical markets, and Reuters reports that OPEC+ will consider extending voluntary oil output cuts into the second quarter to provide additional support for the market.

Bulls will be hoping to see continued trend lower in crude builds and ongoing product draws in tonight's API data...

API

Big surprise crude build was not what the doctor ordered, but another bigger than expected gasoline draw helps offset some of the pain...

Source: Bloomberg

WTI was hovering around $78.65 ahead of the API print and dropped on the print...

So-called prompt spreads - the premium that the most immediate crude futures contract commands over the next one - for Brent and West Texas Intermediate recently rallied to the widest backwardation in about four months, excluding contract expiry anomalies.

Spreads are “on fire, pointing to tight physical markets,” said Daniel Ghali, a commodity strategist at TD Securities.

WTI prompt spread...

“With Europe taking fewer Middle East barrels due to the extra shipping costs to avoid the Red Sea, there is a preference for short haul and that pool of alternatives is thinner,” said Christopher Haines, an analyst at Energy Aspects.

Brent prompt spread..

Other gauges such as the so-called physical market swaps and the WTI cash roll have also strengthened.