HOUSTON: Oil prices gained more than 1% on Thursday as cold weather gripped parts of the US and Europe, driving up winter fuel demand.
Brent crude futures were up 82 cents, or 1.08%, at $76.98 a barrel by 11:41 a.m. EST. US West Texas Intermediate crude futures gained 73 cents, or 1%, to $74.05. Global benchmark Brent gained more than $1 during the session. Both benchmarks had fallen more than 1% on Wednesday as a stronger dollar and a bigger than expected rise in US fuel stockpiles pressured prices.
“(Today’s rise) is definitely winter fuel demand kicking in here in the US for sure,” said John Kilduff, partner at Again Capital in New York. Parts of east Texas up to the north of Kentucky were under a winter storm warning on Thursday, according to the National Weather Service, covering large swathes of Arkansas and Tennessee.
“Right now it appears that the ice will stay north of refinery row along the US Gulf Coast, but power outages will be a concern as heavy rain and wind comes along for the ride,” TACenergy’s trading desk wrote on Thursday.
“Yesterday we saw a strong refinery run rates, refiners in the US are clearly cranking out fuels of all stripes and that is also underpinning the crude oil market today,” Again Capital’s Kilduff added.
Refinery crude runs rose by 45,000 barrels per day (bpd) in the week to Jan. 3 according to the Energy Information Administration on Wednesday, while utilization rates climbed by 0.6 percentage points to 93.3%. Refiners along the US Gulf Coast raised their crude oil net inputs to the highest levels since December 2018, the EIA said.
Meanwhile, JPMorgan analysts expect oil demand for January to expand by 1.4 million barrels per day (bpd) year on year to 101.4 million bpd, primarily driven by the increased use of heating fuels in the Northern Hemisphere.
“Global oil demand is expected to remain strong throughout January, fuelled by colder than normal winter conditions that are boosting heating fuel consumption, as well as an earlier onset of travel activities in China for the Lunar New Year holidays,” the analysts said. The market structure in Brent futures is also indicating that traders are becoming more concerned about supply tightening at the same time demand is increasing.
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