U.S. oil futures looked to stretch their gains into a fourth straight session on Tuesday, a day after the Organization of the Petroleum Exporting Countries and its allies decided not to accelerate its plan for gradually relaxing production cuts.
Natural-gas futures also rallied, with prices up by more than 7%, on track for the highest finish in nearly 13 years, with U.S. supplies tight ahead of the winter heating season.
West Texas Intermediate crude for November delivery rose $1.57, or 2%, to $79.19 a barrel on the New York Mercantile Exchange after posting the highest finish for a front-month contract since Nov. 11, 2014 on Monday, according to Dow Jones Market Data.
December Brent crude, the global benchmark, was up $1.66, or 2%, at $82.92 a barrel on ICE Futures Europe. Brent on Monday posted its highest close since Oct. 16, 2018.
Crude futures jumped Monday after OPEC+ affirmed its plan to raise output by 400,000 barrels a day in November, in keeping with a plan agreed in July to increase production by that amount in monthly increments until existing output curbs imposed during the pandemic are fully reversed.
“In view of the significantly higher price level and the tight market situation, several market participants had been hoping for a more pronounced expansion of supply,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.
“Even after the production hike that has been decided, the oil market is likely to show a sizable supply deficit in the fourth quarter because oil demand is considerably more robust than anticipated,” he said.
Analysts said momentum could continue to take crude prices higher in the near term.
“Oil prices have risen almost uninterruptedly over the past seven weeks, adding more than 25% over that period. That does not mean that the potential of the rally has been exhausted,” with much of the rise marking a recovery from a deep correction, said Alex Kuptsikevich, senior market analyst at FxPro, in emailed comments.
“Oil has lagged noticeably behind [natural] gas and coal in its momentum and potentially has significant upside potential,” he said.
Meanwhile, natural-gas futures saw its November contract up by 42.1 cents, or 7.3%, to $6.187 per million British thermal units. Front-month prices headed for the highest settlement since December 2008.
Prices got a boost from forecasts for colder weather later in the in the week across much of the country, analysts at Sevens Report Research wrote in Tuesday’s newsletter. “Weather remains the key variable for natural gas going forward, and if there is an early start to winter cold weather, the rally in [natural gas] will continue.”
Energy traders also awaited a weekly update on U.S. petroleum supplies from the Energy Information Administration due out Wednesday.
On average, analysts forecast a climb of 200,000 barrels in domestic crude supplies for the week ended Oct. 1, according to a survey conducted by S&P Global Platts. They are expect to see inventory declines of 700,000 for gasoline and 1.7 million barrels for distillates.
On Nymex Tuesday, November gasoline tacked on 2.4% to $2.364 a gallon and November heating oil added 2.4% to $2.494 a gallon.