WASHINGTON (DTN) -- Reversing late morning losses triggered by bearish U.S. inventory data, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Thursday's session higher. The November West Texas Intermediate contract rose above $81 barrel (bbl) at the close, propelled by across-the-board upgrades to the winter fuel demand outlook from major forecasting agencies, joined by declining COVID-19 cases globally that are seen boosting mobility in the fourth quarter.
The International Energy Agency, Organization of the Petroleum Exporting Countries, and U.S. Energy Information Administration this week upgraded their estimates for fourth quarter oil demand, with signs of growing consumption for gas-to-oil power switching emerging across the global economy. Thursday morning, IEA said global oil consumption will grow 5.5 million barrels per day (bpd) this year, up 170,000 bpd from their previous assessment, due to the energy crisis in the European Union and Asia. Next year, demand is seen growing by 3.3 million bpd to above pre-COVID levels of 99.6 million bpd.
"Record coal and gas prices as well as rolling blackouts are prompting the power sector and energy-intensive industries to turn to oil to keep the lights on and operations humming," said IEA in comments accompanying the forecast.
This follows similar projections from OPEC and EIA earlier this week, with the former calling for demand to jump to 99.82 million bpd in the fourth quarter.
Aside from the ongoing energy crisis, demand outlook has been further boosted by declining COVID-19 cases across industrialized economies, prompting calls for higher air and road traffic this holiday season. IEA estimates global gasoline demand is currently running just 2% below pre-COVID levels compared with a deficit of more than 10% at the start of the year.
Oil futures only briefly came under selling pressure from a rather bearish U.S. inventory report published by EIA late morning showing nationwide crude oil inventories increased by a larger-than-expected 6.1 million bbl last week and refiners sharply reduced run rates amid fall maintenance. Domestic refiners processed 683,000 bpd less crude last week at a rate of 15.061 million bpd. Furthermore, domestic oil production rose for the sixth consecutive week to 11.4 million bpd -- about 100,000 bpd below the rate seen prior to Hurricane Ida's landfall on Aug. 29, EIA data shows. Meanwhile, demand for both gasoline and distillate fuels softened -- directionally in line with findings in DTN Refined Fuels Demand data.
In broader markets, stocks on Wall Street powered higher and the U.S. Dollar Index declined below 94 after weekly unemployment claims fell to a new pandemic low with 293,000 applications, down a larger-than-expected 36,000, according to U.S. Labor Department. This is the lowest level for this average since March 14, 2020, when it was 225,500. Unemployment claims have declined for a third consecutive week after moving higher for most of September.
Also, U.S. Producer Price Index (PPI) for the final demand in September increased 0.5%, the U.S. Bureau of Labor Statistics reported Thursday morning, following a 0.7% gain in wholesale costs in August and 1% hike in July. Almost 80% of the increase in PPI was driven by a 1.3% gain in prices for final demand goods -- the largest monthly increase since May, while the final demand services index edged 0.2% higher last month. A 3.9% gain in gasoline prices led the final demand goods index higher in September.
On the session, WTI November futures advanced $0.87 to finish at an $81.31 bbl seven-year high on the spot continuous chart, and the international crude benchmark Brent contract for December delivery settled at $84 bbl, up $0.82 from the previous session's close. NYMEX ULSD November contract advanced 4.03 cents to $2.5614 gallon, and front-month RBOB rallied 2.95 cents for a $2.4350 gallon settlement.
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