Oil prices rose on Thursday, reversing previous losses, on expectations that high natural gas prices as winter approaches may drive a switch to oil to meet heating demand needs.
U.S. West Texas Intermediate (WTI) crude futures climbed 22 cents, or 0.28%, to $80.77 a barrel, after dropping 0.3% the previous day.
Brent crude futures gained 35 cents, or 0.42%, to $83.68 a barrel after falling 0.3% on Wednesday.“Investors bet that surging gas prices will encourage power generators to switch to oil as winter demand season is approaching,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
Prices were also supported by concerns about supply tightness after the U.S. Energy Information Administration (EIA) said on Wednesday that crude oil output in the United States, the world’s biggest producer, is going to decline in 2021 more than previously forecast thought it will bounce back in 2022.
“The current tightness in the crude market and near-term outlook for seasonal demand increases lent support to investors’ sentiment, outweighing a bigger-than-expected build in the U.S. crude inventories and weaker demand forecast by OPEC,” Kikukawa said.
The American Petroleum Institute (API) said late on Wednesday that U.S. crude stockpiles rose by 5.2 million barrels for the week ended Oct. 8, according to market sources who saw the API data.
The API also reported gasoline inventories fell by 4.6 million barrels and distillate stocks fell by 2.7 million barrels, the sources said.
Analysts in a Reuters poll expected crude inventories to rise by 700,000 barrels.
The Organization of the Petroleum Exporting Countries (OPEC) trimmed its world oil demand growth forecast for 2021 in its latest monthly report on Wednesday, while maintaining its 2022 view.
However, the producer group said rising natural gas prices could boost demand for oil products as end users switch fuels.
The EIA will release its inventory report later on Thursday at 11 a.m. EDT.