Oil futures edged higher on Thursday, boosted after the International Energy Agency underlined rising demand from power generators in the face of soaring prices for natural gas and coal.
Prices pared most of their gains, however, after U.S. government data revealed a third straight weekly rise in domestic crude inventories, the largest since March.
The Energy Information Administration reported on Thursday that U.S. crude inventories rose by 6.1 million barrels for the week ended Oct. 8. That was the third weekly supply climb in a row and the largest weekly rise since March, according to EIA data.
The increase defied expectations for an average 500,000 barrel decline expected by analysts polled by S&P Global Platts. The American Petroleum Institute late Wednesday reported a 5.2 million-barrel climb for last week. The EIA and API reports were each released a day later than usual this week because of Monday’s Columbus Day holiday.
Crude oil saw a much larger supply build than was expected, and a large draw out of the Cushing, Okla., storage hub, Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch. The EIA data also showed crude stocks at the Cushing down by 1.9 million barrels for the week.
U.S. consumer price index numbers came in stronger than expected on Wednesday and it “looks like inflation concerns being transitory are very much in doubt,” he said. “Inflation would help crude oil remain strong. However, since we are getting to the tail end of hurricane season and driving season easing, we wouldn’t be surprised to see crude oil give back some of the gains we have seen in recent weeks.”
West Texas Intermediate crude for November delivery
rose 7 cents, or 0.1%, to $80.51 a barrel on the New York Mercantile Exchange. Prices traded at $81.23 shortly before the EIA supply data.
December Brent crude
the global benchmark, was up 15 cents, or 0.2%, to $83.33 a barrel on ICE Futures Europe, down from an intraday high of $84.50.
The EIA also reported a weekly inventory decline of 2 million barrels for gasoline, but said distillate supplies were “virtually unchanged” last week. Both remained below the five-year average level for this time of year. The S&P Global Platts survey had forecast supply declines of 400,000 barrels for gasoline and 800,000 barrels for distillates.
Oil prices looked to finish Thursday at fresh multiyear highs, with U.S. benchmark WTI crude on track for the highest settlement since late October 2014 and Brent crude eying the highest close since early October 2018.
“Oil is continuing its upward trend, driven by the global energy crunch and supply restraints from the world’s top producers,” said Lukman Otunuga, senior research analyst at FXTM, in a note.
In its closely watched monthly report, the Paris-based IEA raised its global oil-demand forecasts for this year and the next by 170,000 barrels a day and 210,000 barrels a day respectively, but added that the cumulative effect of the continuing energy crisis could be as large as 500,000 barrels a day from September through next year’s first quarter.
The IEA noted a “massive” switch to crude by power generators amid a shortage of natural gas, liquefied natural gas and coal supplies. Analysts have widely cited the phenomenon as a driver of the recent leg of the oil rally, which has propelled the U.S. benchmark to a nearly seven-year high and seen Brent trade near three-year highs.
Meanwhile, natural-gas futures extended early gains after the EIA reported on Thursday that domestic supplies of natural gas rose by 81 billion cubic feet for the week ended Oct. 8. That was a bit lower than the average increase of 89 billion cubic feet forecast by analysts polled by S&P Global Platts.
November natural gas
tacked on 24.4 cents, or 4.4%, to $5.834 per million British thermal units.
In a monthly report on Wednesday, the EIA warned that U.S. households that primarily use natural gas to heat their homes will likely spend 30% more on heating bills compared to last year.
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