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Oil rises 1% on supply concerns, expectations for fuel switching

Published 09/13/2022, 09:27 PM
Updated 09/14/2022, 02:51 PM
© Reuters. A view shows the crude oil terminal Kozmino on the shore of Nakhodka Bay near the port city of Nakhodka, Russia August 12, 2022. REUTERS/Tatiana Meel

© Reuters. A view shows the crude oil terminal Kozmino on the shore of Nakhodka Bay near the port city of Nakhodka, Russia August 12, 2022. REUTERS/Tatiana Meel

By David Gaffen

NEW YORK (Reuters) -Oil edged up 1% on Wednesday as an international energy watchdog expects an increase in gas-to-oil switching due to high prices this winter, even though the outlook for demand remains gloomy.

Brent crude futures settled up 93 cents, or 1%, at $94.10 a barrel, while U.S. West Texas Intermediate crude ended $1.17, or 1.3%, higher at $88.48.

The International Energy Agency (IEA) expects the deepening economic slowdown and a faltering Chinese economy to cause global oil demand to grind to a halt in the fourth quarter of the year. That has kept prices under pressured of late, and may inhibit further rallies.

"I think we're going to stay in a range," said Eli Tesfaye, senior market strategist at RJO Futures in Chicago. "I don't think $70 per barrel is in the cards, but anything over $100 is not justified."

The IEA also said it expects widespread switching from gas to oil for heating purposes, saying it will average 700,000 barrels per day (bpd) in October 2022 to March 2023 - double the level of a year ago. That, along with overall expectations for weak supply growth, helped boost the market.

Global observed inventories fell by 25.6 million barrels in July, the IEA said.

In the United States, however, crude inventories rose last week for a second week in a row, once again boosted by the ongoing releases from the Strategic Petroleum Reserve (SPR), latest government data showed. Commercial stocks rose by 2.4 million barrels as 8.4 million barrels were released from the SPR, part of a program scheduled to end next month. [EIA/S]

"The crude number suggests that once we wind down the clock on the Strategic Petroleum Reserve release, we’re going to see substantial drawdowns in inventories so that’s keeping oil high," said Phil Flynn, an analyst at Price Futures Group in Chicago.

© Reuters. A view shows the crude oil terminal Kozmino on the shore of Nakhodka Bay near the port city of Nakhodka, Russia August 12, 2022. REUTERS/Tatiana Meel

Traders also said the lack of certainty around a possible U.S. rail stoppage due to an ongoing labor dispute is adding a bit of support to the market. Three unions are negotiating for a new contract that could affect rail shipments, which are important for crude and product deliveries.

The Organization of the Petroleum Exporting Countries (OPEC) on Tuesday said global oil demand in 2022 and 2023 will come in stronger than expected, citing signs that major economies are faring better than expected despite challenges such as surging inflation.

Latest comments

weak supply, righ. If supply is so bad why are oil and gas inventories climbing overall. The weekly inventories bounce up and down but the overalk trend for the last eight months are building inventories. The oil price are too speculation driven on not based on actual supply/demand relationships.
Supply of Russian oil & gas to EU & etc. has been bad.
Yes the “ Big Guy” has a lot of friends in media…
The "orange guy" made a lot of enemies everywhere.
no hurricanes this year? Oil "investors" must be mad
dip huh!? looks up 2 bucks to me..how much do these writers make? where do i apply.
Look at what oil price was when article came out, not when you read it.
loser alert..every day,same stories on here.just mix the words up. sickening like the buden admin.
People like Trump & Alex Jones go for hype, which is why they need to invent new lies frequently.
Jigar Thakor
hi
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