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U.S. oil futures stretched their gains into a fourth straight session on Tuesday to their highest settlement since late October 2014, a day after the Organization of the Petroleum Exporting Countries and its allies decided not to accelerate its plan for gradually relaxing production cuts.
Natural-gas futures also rallied, with prices up by more than 9% to post the highest finish in nearly 13 years, with global supplies tight ahead of the winter heating season.
While additional oil supply from OPEC+ is bearish on its own, “some had hoped for a much stronger response from OPEC+ members in light of hyper-bullish conditions across global energy markets,” said Robbie Fraser, global research & analytics manager at Schneider Electric.
“With the global crude market consistently undersupplied already, record [natural] gas prices across key demand regions are expected to cascade into a strong uptick in heating demand for products like diesel and fuel oils,” he said in a daily note. That is ultimately supporting further draws of combined crude and product stocks, which “already sit well below normal for this time of year.”
West Texas Intermediate crude for November delivery
CL00,
CLX21,
rose $1.31, or 1.7%, to settle at $78.93 a barrel on the New York Mercantile Exchange. That was the highest front-month contract finish since oct. 21, 2014, according to Dow Jones Market Data.
December Brent crude
BRN00,
BRNZ21,
the global benchmark, added $1.30, or 1.6%, at $82.56 a barrel on ICE Futures Europe. Brent registered its highest close since Oct. 10, 2018.
Crude futures jumped Monday after OPEC+ affirmed its plan to raise output by 400,000 barrels a day in November, in keeping with a plan agreed in July to increase production by that amount in monthly increments until existing output curbs imposed during the pandemic are fully reversed.
“Even after the production hike that has been decided, the oil market is likely to show a sizable supply deficit in the fourth quarter because oil demand is considerably more robust than anticipated,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.
Commodities Corner: Why the oil market is both bullish and ‘on edge’ after the OPEC+ oil output decision
Analysts said momentum could continue to take crude prices higher in the near term.
“Oil prices have risen almost uninterruptedly over the past seven weeks, adding more than 25% over that period. That does not mean that the potential of the rally has been exhausted,” with much of the rise marking a recovery from a deep correction, said Alex Kuptsikevich, senior market analyst at FxPro, in emailed comments.
“Oil has lagged noticeably behind [natural] gas and coal in its momentum and potentially has significant upside potential,” he said.
Meanwhile, natural-gas futures saw its November contract
NGX21,
NG00,
up by 55 cents, or 9.5%, to settle at $6.312 per million British thermal units. Front-month prices marked the highest settlement since December 2008.
Prices also got a boost from forecasts for colder weather later in the in the week across much of the U.S., analysts at Sevens Report Research wrote in Tuesday’s newsletter. “Weather remains the key variable for natural gas going forward, and if there is an early start to winter cold weather, the rally in [natural gas] will continue.”
Energy traders also awaited a weekly update on U.S. petroleum supplies from the Energy Information Administration due out Wednesday.
On average, analysts forecast a climb of 200,000 barrels in domestic crude supplies for the week ended Oct. 1, according to a survey conducted by S&P Global Platts. They are expect to see inventory declines of 700,000 barrels for gasoline and 1.7 million barrels for distillates.
On Nymex Tuesday, November gasoline
RBX21,
tacked on 2.1% to $2.358 a gallon and November heating oil
HOX21,
added 2.3% to $2.494 a gallon.
