Oil prices rose on Thursday after top oil producer Saudi Arabia dismissed calls for additional OPEC+ supply and the International Energy Agency said surging natural gas prices could boost demand for oil among power generators.
The market trimmed gains after U.S. crude inventories rose more than anticipated as refiners cut production in a generally slower period for those facilities.
U.S. crude stocks rose by a surprising 6 million barrels, much higher than the modest 702,000-barrel increase analysts had expected. Production edged higher, reaching 11.4 million bpd.
"The continued rise in domestic U.S. oil production pulls the market back down a bit. It should relieve some of the pressure building in the market," said John Kilduff, partner at Again Capital LLC in New York.
Oil demand is set to jump by half a million barrels per day (bpd) as the power sector and heavy industries switch from more expensive sources of energy, the IEA said, warning that the energy crunch could stoke inflation and slow the world's economic recovery from the pandemic.
In its monthly report, the IEA increased its global oil demand growth forecast in 2022 by 210,000 bpd, and now expects total oil demand in 2022 to reach 99.6 million bpd, slightly above pre-pandemic levels.
Saudi Arabia dismissed calls for additional OPEC+ production increases, saying the group's unwinding of production cuts was protecting the oil market from wild price swings seen in natural gas and coal markets.
At its meeting this month, OPEC+ stuck to its previous agreement to increase output by 400,000 bpd a month.
OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, has done a "remarkable" job as so-called regulator of the oil market, Saudi Arabia's energy minister Prince Abdulaziz bin Salman told a forum in Moscow.
U.S. shale producers have been reluctant to invest in raising output after years of weak returns. U.S. production remains well short of late 2019's record at nearly 13 million barrels per day. On Wednesday, the EIA said output would rebound to 11.7 million bpd in 2022.
The White House has been in discussions with oil and gas producers about fuel costs, with retail gasoline prices at seven-year highs and winter heating bills expected to rise.