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Oil prices rose on Thursday to extend gains from the previous session as US crude and fuel inventories tightened further, with supplies of gasoline hitting a two-year low, pointing to strong demand.
Brent crude futures climbed 17 cents, or 0.2 per cent, to $85.99 a barrel at 0040 GMT, after rising 0.9 per cent on the previous day.
US West Texas Intermediate (WTI) crude futures for December gained 37 cents, or 0.4 per cent, to $83.79 a barrel. November WTI crude, which expired on Wednesday, settled up 91 cents, or 1.1 per cent, after touching the highest since October 2014 earlier in the session.
US crude stocks fell by 4,31,000 barrels in the week to October 15 to 426.5 million barrels, compared with analysts' expectations in a Reuters poll for a 1.9 million-barrel rise, the US Energy Information Administration (EIA) said on Wednesday.
US stocks at the Cushing, Oklahoma delivery hub hit their lowest level since October 2018, pointing to tightness in the market that may take some time to alleviate.
US gasoline stocks fell by a more-than-expected 5.4 million barrels in the week to 217.7 million barrels, the lowest since November 2019, the EIA said, while distillate stocks fell to levels not seen since April 2020.
"Crude oil inventories at Cushing have been drawing dramatically, supporting WTI flat price and structure, with the backwardation on the prompt end of the WTI curve, strengthening above 50 cents," Citi Research said in a note.
"This trend is despite the autumn maintenance season, which is expected to loosen US crude oil balances in October 21," Citi added.
In a sign of market tightness, WTI futures contracts are currently in steep backwardation, where later-dated contracts trade are at a lower price than the current contract. Normally later months trade at a higher price, reflecting the costs of storing oil.
The steep backwardation encourages companies to sell oil immediately rather than keep it in storage.
Oil refiners are ramping up output to meet a synchronised uptick in demand across Asia, Europe and the US, but plant maintenance and high natural gas prices will constrain supply in the fourth quarter, company officials and analysts said.
Oil markets hit multi-year highs earlier in the week also supported by a global coal and gas crunch, which has driven a switch to diesel and fuel oil for power generation.
But the Chinese government flagged on Tuesday it was looking for ways to tame record high coal prices and that it would ensure coal mines operate at full capacity to help ease a power shortage.
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