Oil prices climbed on Thursday, reversing previous losses, as a bigger-than-expected draw in U.S. gasoline and distillate stocks prompted buying.
The uptick was also supported by expectations that soaring natural gas prices as winter approaches will drive a switch to oil to meet heating demand.
Brent crude futures gained 67 cents, or 0.8%, to $83.85 a barrel at 0647 GMT after falling 0.3% on Wednesday.
U.S. West Texas Intermediate (WTI) crude futures climbed 62 cents, or 0.8%, to $81.06 a barrel, more than recouping the previous day’s 0.3% decline.
“A larger-than-expected drop in the U.S. gasoline and distillate inventories led to fresh buying,” said Kazuhiko Saito, chief analyst at Fujitomi Securities Co Ltd.
The American Petroleum Institute (API) said on Wednesday U.S. crude stockpiles rose by 5.2 million barrels for the week ended Oct. 8, but gasoline inventories fell by 4.6 million barrels and distillate stocks declined by 2.7 million barrels, according to market sources who saw the API data.
Analysts in a Reuters poll expected crude inventories to rise by 0.7 million barrels, but gasoline stocks to drop by 0.1 million barrels and distillate to decline by 0.9 million barrels.
“With OPEC+ sticking to an existing pact for a gradual increase in oil output and some OPEC countries missing to reach their quota, supply will remain tight and oil prices will stay on a bullish trend at least until next OPEC+ meeting,” Saito said.
The Organization of the Petroleum Exporting Countries, Russia and their allies, known as OPEC+, earlier this month “reconfirmed the production adjustment plan”, referring to a previously agreed deal under which 400,000 barrels per day (bpd) would be added in November.
Angola is likely to struggle to meet its OPEC output quota for at least two years, Finance Minister Vera Daves de Sousa told Reuters last month.
Oil 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, though it will bounce back in 2022.
“Investors also 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.
“The current tightness in the crude market and near-term outlook for seasonal demand increases lent support to investors’ sentiment, outweighing weaker demand forecast by OPEC,” Kikukawa said.
The 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 (1500 GMT).