Brent rose above 107 dollars a barrel on Friday as bitter cold in the U.S.boosted demand for oil and drew down the country’s crude stockpile and distillates.
Distillate stocks plunged three-and-a-half times more than expected, driving US ultra low-sulfur diesel futures, or heating oil, futures to their highest this year.
The situation helped the U.S crude benchmark towards its best week in seven.
Brent, poised for its biggest gain in five weeks, also climbed as European refiners shipped diesel to the world’s biggest oil consumer.
Brent crude rose eight cents to 107.66 dollars a barrel, ending 69 cents lower in the previous session following weak factory activity data from China.
U.S oil increased 18 cents to 97.50 dollars, extending gains after settling 59 cents up.
“The U.S benchmark is drawing support from the fall in heating oil stocks as a result of the severe winter,” said Tetsu Emori, a commodities fund manager at Astmax Investment.
“It may be helping Brent as European refiners export heating oil to the United States, to the East Coast.”
Refiners in Asia, Europe and Russia are shipping around half a million tonnes of heating oil and diesel to the U.S this month.
At least a dozen tankers are booked so far in January to ship gas oil and diesel to the U.S. East Coast, according to traders and shipping data.
U.S distillate stocks fell 3.21 million barrels in the week ended Jan. 17, the Energy Information Administration (EIA) said, compared with analysts’ expectations of a 900,000 barrel draw.
Distillate demand over the past four weeks rose 5.2 per cent from a year earlier to 3.46 million barrels, the EIA said.
“Distillates stocks decreased by more than expected, with stocks remaining below the bottom of the five-year range,” analysts at BNP Paribas said in a note.
These supporting factors may result in the US benchmark rising towards 98 dollars a barrel and Brent inching higher to around 108.50 dollars, said Emori of Astmax Investment.
In addition to the weekly EIA data, a monthly report from industry group American Petroleum Institute, also showed a rise in the U.S petroleum product demand.
The rise in the product reflects a continued improvement in domestic manufacturing and the broader economy.
Demand in December rose 5.8 per cent year-on-year to 19.2 million barrels per day (bpd).
Order for gasoline rose from 4.5 per cent to 8.8 million barrels.
Meanwhile, gasoline production hit a record for that month at 9.4 million bpd and was just 66,000 bpd below an all-time high. (Reuters/NAN)
