Oil rises 2% on supply issues and fuel switch expectations

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

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NEW YORK, Sept 14 (Reuters) – Oil rose around 2% on Wednesday, rebounding from lows a day earlier, as an international energy watchdog expects an increase in the passage of the gas to oil due to high prices this winter, although the outlook for demand remains bleak.

Brent crude futures rose $1.61 a barrel, or 1.8%, to $94.78 at 10:43 a.m. EDT (2:43 p.m. GMT). U.S. West Texas Intermediate crude gained $1.89, or 2.1%, to $89.20.

The International Energy Agency (IEA) expects the worsening economic slowdown and a faltering Chinese economy to cause global oil demand to come to a halt in the fourth quarter of the year. Read more

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However, the IEA also said it expects a widespread switch from gas to oil for heating purposes, saying it will average 700,000 barrels per day (bpd) from October 2022 to March 2023. , double the level of a year ago. This, combined with global expectations of weak supply growth, helped boost the market.

Observed global inventories fell by 25.6 million barrels in July, the IEA said.

U.S. inventories rose last week, once again boosted by ongoing releases from the Strategic Petroleum Reserve (SPR), according to the latest government data. Commercial stocks rose by 2.4 million barrels as 8.4 million barrels were released from the SPR, under a program due to end next month.

“The raw number suggests that once we slow down the release of the Strategic Petroleum Reserve, we’re going to see substantial inventory reductions, which will keep oil high,” said Phil Flynn, an analyst at Price Futures Group in Chicago.

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

The market had previously traded lower on demand concerns as global central banks continued to raise interest rates to curb inflation.

European Central Bank (ECB) Chief Economist Philip Lane reiterated the bank’s commitment to continue raising interest rates with a focus on inflation. Read more

Rising energy prices remain a “dominant driving force of inflation” in the eurozone, Lane said.

A warmer-than-expected U.S. inflation report on Tuesday also dashed hopes that the Federal Reserve could ease rate-tightening in the months ahead.

Fed officials are due to meet next Tuesday and Wednesday, with inflation well above the US central bank’s 2% target. Read more

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Reporting by David Gaffen; Additional reporting by Stephanie Kelly and Rowena Edwards; Editing by Marguerita Choy

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David Gaffen oversees a North American oil and gas writing and reporting team; he previously worked at The Wall Street Journal and TheStreet.com

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