Oil rallies on tight U.S. stocks as winter blast hits

Oil prices rose for a fourth straight day on Thursday with U.S. crude, heating oil and jet fuel stocks seen tight just as a chilly blast hits the United States and travel is set to soar for the holiday season.

U.S. West Texas Intermediate (WTI) crude futures climbed 35 cents, or 0.5%, to $78.64 a barrel, while Brent crude futures gained 27 cents, or 0.3%, to $82.47 at 0145 GMT, extending gains of around 2.7% in the previous session.

Both benchmark contracts jumped on Wednesday after government data showed U.S. crude inventories fell by much more than analysts had expected, posting a drop of 5.89 million barrels for the week ending Dec. 16.

At the same time there was a decline in distillate stocks, which include heating oil and jet fuel, which defied expectations for a build.

The falling stockpiles come as demand for heating oil is set to soar with a powerful winter storm hitting the United States, expected to bring sub-zero wind chills as far south as Texas and record-breaking lows to Florida and the eastern states.

Jet fuel consumption is also expected to pick up with a post-COVID boom in travel for the end-of-year holiday season.

“On our numbers…the crude market is finely balanced,” said National Australia Bank‘s head of commodity research Baden Moore.
“As we look into 2023, we see China‘s re-opening and a likely continued steady roll-up in global jet demand (towards 2019 levels) will tighten global crude markets and drive prices higher,” he said.

A softer U.S. dollar has also buoyed oil prices, as crude becomes cheaper for buyers holding other currencies.