Commodity Market: US Crude Oil rises over 1% as US fuel inventories drop more than anticipated

Futures on US West Texas Intermediate Crude Oil rose over 1% on Thursday, after an industry report showed a larger-than-expected drop in US fuel stocks.

Additionally, expectations that rising natural gas prices ahead of the winter period will probably trigger a switch to oil to meet heating demand also supported the market.

The American Petroleum Institute (API) reported on Wednesday that US crude oil inventories had increased by 5.123 million barrels during the week ended October 8th. However, US gasoline inventories decreased by 4.6 million barrels and distillate inventories dropped by 2.7 million barrels last week.

“A larger-than-expected drop in the U.S. gasoline and distillate inventories led to fresh buying,” Kazuhiko Saito, chief analyst at Fujitomi Securities Co Ltd, was quoted as saying by Reuters.

“With OPEC+ sticking to an existing pact for a gradual increase in oil output and some OPEC countries missing to reach their quota, supply will remain tight and oil prices will stay on a bullish trend at least until next OPEC+ meeting,” Saito added.

Earlier in October, OPEC+ members “reconfirmed the production adjustment plan”, which envisages the addition of 400,000 barrels per day of output in November.

The black liquid also received support due to supply tightness concerns after the US Energy Information Administration (EIA) said yesterday that US crude oil production would probably decrease at a sharper rate than previously expected in 2021 before rebounding in 2022.

“Investors also bet that surging gas prices will encourage power generators to switch to oil as winter demand season is approaching,” Hiroyuki Kikukawa, general manager of research at Nissan Securities, said.

“The current tightness in the crude market and near-term outlook for seasonal demand increases lent support to investors’ sentiment, outweighing weaker demand forecast by OPEC.”

The official report on oil inventories by the US Energy Information Administration is scheduled to be released later today.

As of 8:54 GMT on Thursday WTI Crude Oil Futures were gaining 1.07% to trade at $81.30 per barrel, while moving within a daily range of $80.41-$81.41 per barrel. Earlier this week the black liquid climbed as high as $82.18 per barrel, which has been its strongest price level since October 29th 2014 ($82.88 per barrel). WTI Crude Oil Futures have risen 8.30% so far in October, following another 9.53% gain in September.

At the same time, Brent Oil Futures were gaining 0.91% on the day to trade at $84.09 per barrel, while moving within a daily range of $83.20-$84.22 per barrel. Earlier this week the commodity climbed as high as $84.58 per barrel, which has been its strongest price level since October 10th 2018 ($85.14 per barrel). Brent Oil Futures have risen 7.55% so far in October, following another 9.28% gain in September.

Daily Pivot Levels (traditional method of calculation) – WTI Crude Oil Futures

Central Pivot – $80.30
R1 – $81.18
R2 – $81.92
R3 – $82.80
R4 – $83.68

S1 – $79.56
S2 – $78.68
S3 – $77.94
S4 – $77.20

Daily Pivot Levels (traditional method of calculation) – Brent Oil Futures

Central Pivot – $83.08
R1 – $83.91
R2 – $84.48
R3 – $85.31
R4 – $86.13

S1 – $82.51
S2 – $81.68
S3 – $81.11
S4 – $80.53