(Bloomberg) -- A key price spread in the market for West Texas Intermediate crude is signaling that oil traders are bracing for a potential supply crunch just ahead of the busy summer driving season that sparks a demand surge.

The June-July WTI time-spread, also known as the prompt cash roll, traded at 20 cents a barrel Tuesday, the strongest level since May 2020, according to Bloomberg data. The spread serves as an indicator of supply-and-demand balances at the main U.S. crude storage hub in Cushing, Oklahoma. Its recent strength shows that inventories are tight just as oil refiners are ramping up output.

This is just the latest indicator of the extreme tightness for U.S. crude supplies as shale producers stay cautious on production after last year’s oil crash. Meanwhile, demand for commodities is surging across the board amid a rebound for the world’s largest economies. That’s stoking inflation concerns and underscores why some traders are betting on staying power for this year’s supercharged rally for energy, metals and agriculture.

U.S. oil output is hovering at 2 million barrels a day, below last year’s peak last year even as benchmark WTI oil futures have surged more than 35% this year and are trading at pre-pandemic levels. Drillers are sticking with the austerity promises they’ve made to investors. In fact, explorers are adding just enough rigs to offset natural declines at wells already in production.

U.S. Sees Less Oil Supply Through 2022 Despite Rising Prices

Meanwhile at the Cushing hub, inventories are below the five-year average. At the same time, American refiners gearing up to meet an anticipated boom in summer demand after the country’s vaccination campaign prompted a steady re-opening of states.

The June-July WTI time-spread surged 67% in two days from 12 cents a barrel on Friday. The spread trades in the three-day period after the expiration of the front-month futures contract. It also enables market participants to roll long positions into the next month.

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