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Oil rallies as U.S. crude stocks decline in tight market

CommoditiesOct 20, 2021 02:55PM ET
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© Reuters. FILE PHOTO: A petrol station attendant prepares to refuel a car in Rome, Italy, January 4, 2012. REUTERS/Max Rossi

By David Gaffen

NEW YORK (Reuters) -Oil prices rallied on Wednesday after U.S. crude inventories at the nation's largest storage site hit their lowest level in three years and nationwide fuel stocks fell sharply, a signal of rising demand.

Brent crude futures settled at $85.82 a barrel, a gain of 0.9% or 74 cents and the highest since October 2018.

November U.S. West Texas Intermediate (WTI) crude, which expires on Wednesday, settled at $83.87, up 91 cents, or 1.1%. The more active WTI contract for December settled up 98 cents to $83.42 a barrel.

Crude prices have risen as supply has tightened, with the Organization of the Petroleum Exporting Countries maintaining a slow increase in supply rather than intervening to add more barrels to the market, and as U.S. demand has ramped up.

Globally, refiners have been boosting output thanks to high margins, one that can only be restrained by maintenance. U.S. refining capacity use dropped in the most recent week, but analysts noted that supply may continue to tighten if U.S. refiners also pick up processing again.

"Stronger demand and concerns about a drop in inventories when refiners were already running a low rate during maintenance season is making people concerned about what will happen when refiners have to ramp up production to meet what is very strong demand for gasoline and distillate," said Phil Flynn, senior energy analyst at Price Futures Group in Chicago.

U.S. crude stocks fell by 431,000 barrels in the most recent week, the U.S. Energy Information Administration said, against expectations for an increase, and gasoline stocks plunged by more than 5 million barrels as refiners cut processing due to maintenance. [EIA/S]

U.S. stocks at the Cushing, Oklahoma delivery hub hit their lowest level since October 2018. Gasoline stocks are now at their lowest since November 2019, the EIA said, while distillate stocks fell to levels not seen since early 2020.

Oil prices have also been swept up in surging natural gas and coal prices worldwide in anticipation that power generators may switch to oil to provide electricity.

Saudi Arabia's minister of energy said users switching from gas to oil could account for demand of 500,000-600,000 barrels per day, depending on winter weather and prices of other sources of energy.

Oil rallies as U.S. crude stocks decline in tight market
 

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Comments (11)
Marco cuevas
Marco cuevas Oct 20, 2021 12:29PM ET
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BIG OIl gonna derail the economy no one is even on vacation right now and it's this high? Oil barrons just mad because they lost money  last year and they are trying to gouge the american public for their rightfully so gains.
Jay Kurian
Jay Kurian Oct 20, 2021 12:29PM ET
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Do you own an electric vehicle, have solar power and nothing you own is made from oil products Marcos?
Eduff San
Eduff San Oct 20, 2021 10:42AM ET
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Fake news again. What is down? lol
Jamie An
Jamie An Oct 20, 2021 10:25AM ET
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Oil is going to high, winter is coming. China is only talking no Action.
Saran Thireach
Saran Thireach Oct 20, 2021 9:35AM ET
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Chinese is the best 🥰
Dale Wyffels
Dale Wyffels Oct 20, 2021 5:35AM ET
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makes no sense
Dale Wyffels
Dale Wyffels Oct 20, 2021 5:34AM ET
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US no longer enery independant, that is treason, market manipulation and not good for anyone in the free world
Dale Wyffels
Dale Wyffels Oct 20, 2021 5:32AM ET
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why did Biden shut off production in the US?? give Russia the European pipeline?? Hmmmm
Jack Bquick
Jack Bquick Oct 20, 2021 5:32AM ET
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Biden paying back Russia for election help.
Jamie An
Jamie An Oct 20, 2021 3:37AM ET
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Global countries will never hands up even Chinese authorities threaten harder. Winter is coming, Do something for your peoples.
Jamie An
Jamie An Oct 20, 2021 3:33AM ET
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Communist authieities speaks loudly as usual he did, but they rely on coal and oil abroad not domestic. Aussie coal never can be used before China gibes political surrender to Australlia.
Jon Benton
Jon Benton Oct 20, 2021 2:09AM ET
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Theyll continue theyre NG contracts with Gazprom ! probably upping the Ante on their contracts ( Clean Energy)
ben catania
ben catania Oct 19, 2021 11:28PM ET
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buying opportunity, CCP cant face the facts that they are dependent on foreign fuel, winter is coming haha
 
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