(Bloomberg) — Oil erased an earlier loss to turn higher as signs of a softer crude market were countered by surging premiums for fuels like gasoline and diesel.

Brent crude (BZ=F) rose toward $65 a barrel for a third day of gains. In addition to rising premiums for fuels, technical traders known as commodity trading advisors could potentially spur additional buying in the coming days, according to consultant Energy Aspects.

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“The larger CTA buy triggers above $64.50 leave the balance of risk skewed to the upside,” said James Taylor, head of the quant service at Energy Aspects. Still, volatility could be limited by hedging flows from dealers, he added.

Oil has backtracked this year after posting losses over the past three months. The prolonged slump has been driven by widespread expectations for a global surplus, with OPEC and its allies loosening output curbs just as drillers from outside the alliance also add barrels.

West Texas Intermediate crude’s prompt spread has narrowed to a premium of as little as 7 cents a barrel on the nearest contract over the next, showing that a bullish backwardation price structure is weakening as markets are expected to be oversupplied.

Still, despite the weakness in crude futures curves, refined products markets have remained strong. Healthy premiums for fuel — one gauge of Europe’s diesel benchmark is the strongest since early last year — alongside wider geopolitical risks, have helped to keep crude prices afloat.

“It is probably fair to conclude that without strong support from refined products, crude prices would be lower,” said Tamas Varga, an analyst at brokerage PVM. “The narrowing backwardation in WTI and Brent is notable; however, unless the rug is decisively pulled out from under refined products, and it is anyone’s guess when that might happen, no major selloff in outright prices appears imminent.”

OPEC is due to release its monthly market analysis on Wednesday, with the International Energy Agency issuing an annual outlook the same day. The IEA has already forecast a record annual glut for 2026, and will update its view in a monthly snapshot on Thursday.

—With assistance from Yongchang Chin.

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