Brent crude futures rose toward $85 a barrel on Tuesday, recovering from a 0.6% drop in the previous session as tightness in energy markets ahead of colder weather in the northern hemisphere supported bullish sentiment. Temperatures in China, the world's biggest energy consumer, are forecast to fall to near freezing in northern areas, according to AccuWeather.com. Brent oil has been tipped to continue its upwards surge after hitting the highest level in three years. The OPEC+ alliance has been struggling to add crude back to the market, in particular some members such as Angola and Nigeria due to lack of investment and exploration. Also, power generators continue to switch from expensive gas and coal to oil and diesel as major industrial countries face power shortages. Still, US oil production is growing, and output is likely to increase further in the US largest shale, according to an official report.
Natural gas futures fell below $5 per million British thermal units, the lowest since September 22nd as US Gasoline futures extended a rally towards $2.5 per gallon, the highest since September 2014, amid tight supplies and a strong rebound in global demand. According to US government figures, gasoline inventory levels dropped by 1.958 million barrels in the first week of October, more than the 0.083 million barrel decrease expected. Elsewhere, the IEA said global gasoline demand stood at just 2% below pre-pandemic levels, boosted by an energy crunch in the northern hemisphere and strong mobility levels. Meanwhile, gasoline sales in the world’s third largest oil consumer India, reached 1.05 million tonnes in October, a 2% monthly increase and up 8.3% from the same month in 2019.
Heating oil futures skyrocketed to $2.6 a gallon, the highest since October 2014, tracking other energy markets higher and are expected to hit household finances as the weather turns colder. Less than 12 million American households rely on heating oil and are concentrated in the US Northeast. Heating oil costs are seen rising 54% from last winter, according to the EIA. Last week, the EIA Petroleum Status Report showed US heating oil inventories increased 0.267 million barrels in the week ending October 8th. Distillate stockpiles, which include diesel and heating oil, went down 0.024 million barrels last week, less than market expectations of a 0.933 million decrease.
Natural gas futures fell below $5 per million British thermal units, the lowest since September 22nd as demand is seen falling amid mild weather in the US for the rest of October. Meanwhile, major Chinese energy companies are in talks with US exporters to secure long-term liquefied natural gas supplies, as soaring gas prices and domestic power shortages heighten concerns about the country's fuel security, Reuters reported mentioning several sources. Still, gas prices remain elevated and not far from a seven-year high of $6.5 early hit earlier in the month, amid strong demand during the winter heating season and depleted inventory levels, especially in Europe and Asia. The EIA forecasts that natural gas prices at the US benchmark Henry Hub will average $5.67 per million British thermal units between October and March, the highest winter price since 2007–2008.