Oil prices were slightly up early on Friday, headed to a third straight week of gains, as U.S. crude inventories dropped to a three-year low and as surging natural gas prices are set to boost demand for alternative fuels.
As of 10:10 a.m. EDT, WTI Crude traded above $73 a barrel, at $73.52, up by 0.35%. Brent Crude prices were above $77 per barrel, having risen by 0.47% at $77.58.
Both benchmarks held close to the two-month high they hit on Thursday after U.S. crude stocks dropped to their lowest since October 2018, and the broader market received more clarity about the Fed's next policy moves.
After the Fed signaled on Wednesday that it could begin tapering asset purchases as soon as November and potentially start raising interest rates as soon as next year, oil market participants turned their focus to global oil inventories, especially those in the United States.
In addition, the aftermath of Hurricane Ida is still curtailing U.S. oil production, with 16 percent of crude oil production in the Gulf of Mexico still offline as of Thursday, according to the Bureau of Safety and Environmental Enforcement (BSEE).
On the bearish corner this week, the Evergrande crisis in China that could lead to an implosion of the Chinese property market has capped oil price gains.
However, soaring natural gas prices are set to boost demand for oil because of fuel switching away from gas, analysts and OPEC say.
"Increased fuel consumption into the northern hemisphere winter due to the substitution of punitively expensive gas may further boost already recovering global demand," Ole Hansen, Head of Commodity Strategy at Saxo Bank, said in a weekly note on Friday.
"In addition, recent months have shown some OPEC+ members, most noticeably Nigeria, Angola and Kazakhstan have struggled to reach their production quota, thereby adding to the underlying market strength, through lower than expected supply," Hansen added.
From a technical viewpoint, the daily Brent chart shows resistance at the $77.84 a barrel high from July. But "the monthly Brent chart is now showing a break above the downtrend from the 2008 record high, potentially a sign of more gains to follow," he added.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More