Crude oil futures rallied during mid-morning Asian trade Oct. 8, extending overnight gains, following reports that the US has no current plans to tap into the country's oil reserves to help quell rising gasoline prices.
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At 11:12 am Singapore time (0312 GMT), the ICE December Brent futures contract was up 1.04 cents/b (1.27%) from the previous close at $82.99/b, while the NYMEX November light sweet crude contract was 1.09 cents/b (1.39%) higher at $79.39/b.
"Crude prices rallied after the Department of Energy spokesperson said the energy agency had no plans to tap the Strategic Petroleum Reserves," OANDA's Senior Market Analyst Edward Moya said Oct. 8.
Crude oil had come under pressure after US Energy Secretary Jennifer Granholm told the Financial times on Oct. 6 that her department was considering an emergency release from the SPR and reimposing the crude export ban, which would help ease tight supplies.
However, crude oil futures climbed back up after the DOE released a statement on Oct. 7 saying that Granholm had not endorsed either option and was only including them among "all the tools" open to the administration. This had shifted market's focus back on the strength of demand amid the energy crisis heading into winter.
NYMEX November RBOB was up 1.68 cents at $2.3512/gal, while November ULSD rose 1.54 cents to $2.4750/gal.
"An acceleration in gas-to-oil switching could boost crude oil demand used to generate power this coming northern hemisphere winter, however, the US may be heading into winter with its lowest stockpiles of heating oil for decades," ANZ research analysts said in a daily note Oct. 8.
"EIA data shows that inventories of distillate, used for both diesel and heating oil, are enough to meet 31.2 days of demand. This is the tightest it has been since 2000," ANZ analysts added.
This also comes after the OPEC+ coalition of OPEC and other oil producers decided on Oct. 4 to stick to its existing plan of raising output only in November by 400,000 b/d, which is likely to leave the market tight in the near term.
Moya also said that the oil market remains heavily in deficit, which will likely be the case over winter. He added that should it be a cold winter in the north, the prospects of front month Brent crude futures hitting $90/b seem very likely.
As for WTI crude, Moya said it may need a fresh catalyst to break above $80/b, which could happen if the recovery in the US labor market shows that the economy is heating up again.