Oil prices rose early on Friday, headed to another week of gains with the U.S. benchmark reaching $80 per barrel, as the world scrambles for natural gas and coal supply for the winter.
Oil prices were headed to a 4-percent gain this week amid restricted supply and rising demand, also due to a gas-to-oil switch amid record-high natural gas prices in Europe and Asia.
The OPEC+ group kick-started this week’s oil price rally after it decided on Monday to keep plans for easing the cuts unchanged, despite calls for more supply from consuming countries, including the United States. OPEC+ will increase supply in November by 400,000 barrels per day (bpd)—the minimum the market was expecting ahead of the meeting. As a result of the decision, WTI Crude prices hit their highest level in seven years.
Oil settled lower on Wednesday after the EIA reported a crude inventory build and energy prices globally fell after Russian President Vladimir Putin suggested that Russia could increase natural gas supply to Europe this winter.
On Thursday, prices reversed losses after reports that the U.S. Department of Energy was walking back previous comments that it was considering a release of the Strategic Petroleum Reserve and a ban on crude oil exports.
Tighter energy supply ahead of the winter continued to support oil prices early on Friday.
“US commercial inventories of distillates — which include diesel for public transportation and industrial use and heating needed in winter — have slumped to the lowest level since 2000 when measured on the basis of demand cover,” Vanda Insights said.
“In general, the risk of tightening markets into the winter months have not gone away, and especially the prospect of gas-to-oil switching could add another layer of demand for crude oil,” Saxo Bank said on Friday.
“A break higher in Brent could see it target the 2018 high at $86.74,” the bank’s strategy team added.