Oil prices rose on global markets on Wednesday as traders fretted over tight energy supplies ahead of approaching winter months.
The prospect of lower US interest rates, which could increase global crude demand by stimulating the world's biggest economy and energy consumer, also supported the day's price gains, traders said. New York's main oil futures contract, light sweet crude for delivery in November, closed up $1.04 at $81.30 per barrel. In London, the price of Brent North Sea crude for November delivery settled up $1.11 at $78.60 per barrel.
Prices had rebounded sharply by a dollar on Tuesday, after slumping by more than two dollars on Monday amid concerns over the rebounding US currency, which has since fallen against major rival currencies. „Oil prices remain well supported by concerns over tight fuel supplies and prospects for an increased demand next year,” said Sucden analyst Michael Davies. „The demand prospects also appeared to have been boosted by expectations of further US interest rate cuts following yesterday's (Federal Reserve) minutes release,” Davies said.
Minutes from the US central bank's September 18 meeting released on Tuesday sparked renewed speculation about the possibility of another US rate cut, dealers said. The Fed slashed American interest rates by half of a percentage point to 4.75% last month. Meanwhile, the US Energy Information Administration (EIA) was due on Thursday to reveal the state of American crude oil inventories in the week ending October 5. The weekly report is being published one day later than usual owing to the Columbus Day public holiday in the United States on Monday.
„There is a bit of trading sideways ahead of the data,” Davies said of Wednesday's price action. The US report is widely expected to show a fall in distillates, including crucial heating fuel, ahead of the peak-demand Northern Hemisphere winter months. Heating costs for US households will take a bigger bite out of incomes in the upcoming winter season as energy costs hover near record levels, according to a US government forecast on Tuesday. Households using natural gas are expected to spend 10% more this winter, or an extra 78 dollars in fuel costs. About 58% of Americans use natural gas as their primary heating source.
Those using heating oil (7% of US households) will pay even more, with costs expected to rise 22% from a year ago, adding an extra 319 dollars to the seasonal bill, the report added. The EIA also said it sees demand higher based on a government report projecting this coming winter will be 4% colder compared with last winter. (channelnewsasia)