US West Texas Intermediate and international-benchmark Brent oil futures are edging higher early Friday, picking up where they left off the previous session.
On Thursday, oil prices rose 1% after top oil producer Saudi Arabia rejected calls for additional OPEC+ supply.
The International Energy Agency said surging natural gas prices could boost demand for oil among power generators.
At 04:28 GMT, December WTI crude oil futures are trading $81.32, up $0.55 or +0.68% and December Brent crude oil is at $84.64, up $0.64 or +0.76%.
Bulls Revel Despite Rising Inventories
The price action suggests traders are downplaying an unexpected significant increase in US crude inventories as refiners cut production, according to a weekly government inventories report.
The catalyst behind today’s strength is a weekly inventories report that showed a bigger-than-expected draw in US gasoline and distillate stocks.
A new forecast calling for lower US crude output is also providing support. Despite a two-day setback, the market remains well-supported by rising demand expectations.
One hope for the bulls is that soaring natural gas prices would drive power generators to switch from natural gas to oil to meet heating demand.
US Crude Oil Output Could Fall More Than Expected
According to a monthly government report released on Wednesday, US crude oil output will fall more than expected in 2021 and bounce back in 2022.
Crude output will drop 260,000 barrels per day (BPD) to 11.02 million BPD this year and then rebound to 11.73 million BPD in 2022, the US Energy Information Administration said.
In its previous forecast, the statistical arm of the Department of Energy had forecast a 200,000 BPD drop in 2021.
The agency cut its output forecast for the third and fourth quarters of 2021 to arrive at the lower number for the year.
Elsewhere, OPEC leader Saudi Arabia dismissed calls for speedier oil output increases on Thursday, saying its efforts with allies were enough in protecting the oil market from the wild price swings seen in natural gas and coal markets.