West Texas Intermediate crude was trading up 0.51% at $70.58, while Brent Crude prices were rising by 0.47% at $74.28
Oil prices rose early on Tuesday, halting two days of losses in a row as the global natural gas crunch has the market evaluating the potential of higher demand for other fuels in the upcoming winter season.
West Texas Intermediate (WTI) crude was trading up 0.51% at $70.58. Brent Crude prices were rising by 0.47% at $74.28.
The surging natural gas prices in Europe just ahead of the winter heating season raise the potential for switching from gas to oil, analysts say.
These higher gas prices should offer some support to the oil market, with the growing potential for gas to oil switching, ING strategists Warren Patterson and Wenyu Yao said on Tuesday.
Moreover, while most of the Gulf of Mexico oil production is now back online after Hurricane Ida, Shell said on Monday that its West Delta-143 offshore facilities had sustained “significant structural damage” from the storm.
Shell estimates that the WD-143 “A” platform facilities will be offline for repairs until the end of this year, and that the facilities on the WD-143 “C” platform will be operational in the fourth quarter of 2021.
The slow return of some of Shell’s production in the Gulf of Mexico and the rising energy prices globally supported oil prices early on Tuesday, following a drop on Monday, driven by a stronger U.S. dollar and a broader market sell-off ahead of Fed’s policy meeting this week and amid concerns about China’s economy.
Oil prices bounced overnight, supported for now by improved risk sentiment, and more importantly the global energy crunch currently unfolding in the natural gas market, a development that is likely to drive increased demand for fuel products as substitution, Saxo Bank’s strategy team said in a note on Tuesday.