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Crude oil futures trade higher on bullish demand outlook, falling inventories at Cushing

Crude oil futures were higher in mid-morning trade in Asia Oct. 15 as bullish US inventory data and requirements for the upcoming winter continued to support the demand outlook.

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At 10:25 am Singapore time (0225 GMT), the ICE December Brent futures contract was up 49 cents/b (0.58%) from the previous close at $84.49/b, while the NYMEX November light sweet crude contract was 42 cents/b (0.52%) higher at $81.73/b.

"Crude oil gained amid signs of ongoing tightness in the market. US inventories at Cushing, the pricing hub for WTI, has also recorded the biggest fall since June," ANZ research analysts said in a note Oct 15, adding that the US Energy Information Administration expects shortages of natural gas to boost demand for crude oil by 500,000 b/d over the next six months.

Crude Inventories at NYMEX delivery point of Cushing, Oklahoma fell almost 2 million barrels to 33.55 million barrels in the week ended Oct. 8, the lowest since October 2018 and nearly 35% behind the five-year average, latest EIA data showed.

The EIA data showed that total US commercial crude inventories climbed 6.09 million barrels to 426.98 million barrels in the week ended Oct. 8, narrowing the inventory deficit to the five-year average to 6.2% from 7% the week before. Total US gasoline stocks fell 1.96 million barrels to 223.11 million barrels in the week, while distillate stocks fell 20,000 barrels to 129.31 million barrels.

Tightening availability at Cushing has supported prompt WTI pricing and contributed to a significant widening in the forward curve's backwardation. The year-ahead WTI contract settled at a $7.47/b discount to the front-month Oct. 14, the widest backwardation since July 13.

OANDA senior market analyst Edward Moya also attributed rising crude prices to latest weather forecasts for the approaching winter.

"Crude prices rallied in early trade [in the US Oct. 14] after the Climate Prediction Center and the International Research Institute for Climate and Society predicted the US could have a cold, wet winter. If La Niña delivers another cold winter, the natural gas crunch will continue to lead to added demand for crude," Moya said.

The International Energy Agency in a monthly oil report late Oct. 14 also highlighted that the oil complex was being supported during the fourth quarter by incremental demand switching from gas to oil, and revised up its demand forecasts for 2021 and 2022 by 170,000 b/d and 210,000 b/d respectively. Global oil demand is now forecast to rise 5.5 million b/d in 2021 and by 3.3 million b/d in 2022 to 99.6 million b/d, slightly above pre-pandemic levels, the agency said.