Oil rises on expectations that high natural gas prices may drive switch to oil
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.
Brent crude futures gained 28 cents, or 0.3%, to $83.46 a barrel at 0107 GMT after falling 0.3% on Wednesday.
U.S. West Texas Intermediate (WTI) crude futures climbed 22 cents, or 0.3%, to $80.66 a barrel, after dropping 0.3% the previous day.
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 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.
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
Crude Oil Futures: Further upside not ruled out
CME Group’s flash data for crude oil futures markets noted traders added around 18.2K contracts to their open interest positions no Wednesday, the second session in a row. On the other hand, volume shrank for the second straight session, this time by around 321.4K contracts.
Crude oil prices charted a doji-style session on Wednesday amidst rising open interest. While the commodity could enter into some consolidation phase in the very near term, further bouts of strength remain in the pipeline with WTI targeting the recent 2021 high at $82.15 (October 11).
WTI Price Analysis: Upside needs daily close above $80.50
WTI prices continue to consolidate gains on Thursday in the European session. The supply-chain bottlenecks underpin the demand for crude oil. At the time of writing, WTI is trading at $80.51, up 0.60% for the day.
On the daily chart, WTI has been in the continuous uptrend after crossing the 21-day Simple Moving Average (SMA) at $67.62 since August 27.
After testing the seven-year high at around $80.00, WTI looks exhaustive near these levels. To continue the upside, the price has to give a daily close above 80.50 to test Monday’s high of 81.28. WTI bulls will then keep their eyes on October 2014 high at $92.96.
Alternatively, if the prices move lower, they would look out for the $79.10 and the $76.60 horizontal support levels respectively, and then march 21-day SMA at $75.70.
Reference: CNBC, FXStreet
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