Global demand for oil to grow

The government predicted that a colder winter ahead will help lift worldwide demand for oil during the fourth quarter.

Photo: Global demand for oil to grow

Global demand for oil to grow

In a monthly report, the Energy Department's Energy Information Administration estimated that global demand for oil will be 1.8 million barrels a day higher in the fourth quarter than it was during the same period last year. The report follows a prediction Thursday from the U.S. National Oceanic and Atmospheric Administration that temperatures in the U.S. will be 1.3 percent colder than last year, although they'll be 2.8 percent warmer than average.

"Initially, traders are relying on the Energy Information Administration (report)," said Tim Evans, an analyst with Citigroup Inc. in New York.

However, Evans also said of Tuesday's trading, "I think there may (also) be a technical element to this."

Oil prices declined more than $2 a barrel on Monday, and have been volatile in recent days. Analysts say investors are engaged in a battle over whether oil supplies are adequate to meet fourth quarter demand. Some investors feel prices have peaked for the year and are due to begin a seasonal decline, while others feel prices could rise again and set new records.

When prices held above $78 on Monday, that may have emboldened some of the more bullish investors to try to push prices to new highs, Evans said.

Light, sweet crude for November delivery rose $1.24 to settle at $80.26 a barrel Tuesday on the New York Mercantile Exchange, while gasoline futures rose 2 cents to settle at $2.0202 a gallon.

November heating oil rose 2.57 cents to settle at $2.1853 a gallon, while natural gas for November rose 1.7 cents to $6.863 per 1,000 cubic feet.

In London, November Brent crude rose 91 cents to settle at $77.49 a barrel on the ICE Futures exchange.

At the pump, meanwhile, gas prices slipped 0.2 cent overnight to a national average of $2.765 a gallon, according to AAA and the Oil Price Information Service. Retail prices have slid in recent weeks as consumer demand for gasoline has fallen.

In addition to reacting to Tuesday's EIA predictions about future demand, traders are anticipating Thursday's EIA report on petroleum inventories.

Crude oil inventories are expected to have gained 1 million barrels in the week ended Oct. 5, according to a Dow Jones Newswires survey of analysts, while refinery use is expected to have fallen by 0.1 percentage point to 87.4 percent of capacity.

Gasoline inventories are expected to have fallen by 300,000 barrels last week while distillates, which include heating oil and diesel fuel, are expected to have declined by 600,000 barrels.