Domestic oil stocks increased for a third consecutive week as demand for petroleum products, including gasoline and jet fuel, declined in tandem with soaring prices.  

The U.S. Energy Information Administration (EIA) said Thursday oil inventories for the week ended Oct. 8, excluding those in the Strategic Petroleum Reserve, increased by 6.1 million bbl from the previous week.

At 427.0 million bbl, inventories are still 6% below the five-year average, EIA’s Weekly Petroleum Status Report showed. This resulted from the combination of mounting demand and modest production over the summer months. However, the deficit has begun to narrow this fall. U.S. oil stocks climbed nearly 13 million bbl over the past three weeks.

Over the final two weeks of September, double-digit increases in imports boosted inventories. In the first full week of October, declining demand more than offset a slight uptick in production, clearing the way for another increase in stocks, EIA reported.

EIA said U.S. production climbed to 11.4 million b/d last week, up 100,000 b/d from the prior week and near highs for the year. Output, however, was still 1.7 million b/d below the 2020 peak.

Consumption of petroleum products last week, meanwhile, dropped 8% week/week to 19.9 million b/d. This coincided with a surge in oil prices driven by global supply concerns. U.S. benchmark West Texas Intermediate crude prices topped $80/bbl this month, reaching seven-year highs, and remained above that threshold Thursday.

Raymond James & Associates Inc. analysts said this likely curbed demand in the Oct. 8 week and could keep downward pressure on consumption this month. Lofty oil prices get passed on to consumers and airlines, among other end users.

At issue: Following a 2021 demand rebound in the United States and across much of Asia and Europe, global shortages of natural gas and coal this fall are pressuring manufacturers and power companies to switch to oil, pushing up crude prices.

In its latest Short-Term Energy Outlook, released Wednesday, EIA said it expects significant increases in home heating costs this winter, including a 30% spike in natural gas expenditures versus last winter.

The International Energy Agency (IEA) said Thursday global heating costs could jump even more, given anemic supplies in Europe as well as parts of Asia and South America. This could add 500,000 b/d to global oil demand. IEA now expects worldwide crude demand in 2022 to exceed pre-pandemic levels at 99.6 million b/d.

“An acute shortage of natural gas and coal supplies stemming from the gathering global economic recovery has sparked a precipitous run-up in prices for energy supplies and is triggering a massive switch to oil products and direct crude use for power generation,” the Paris-based organization said in a new report.

While the United States gradually increases output, other major oil-producing countries are starting to ramp up.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia, aka OPEC-plus, this month approved another 400,000 b/d production increase for November, extending monthly increases launched in August.

In a monthly oil market report, Saudi Arabia-led OPEC estimated global demand would average 100.8 million b/d in the year ahead.  The researchers said global economic growth forecasts for 2021 and 2022 were 5.6% and 4.2%, respectively, and global activity should support rising oil demand even after the winter months.

Deputy Prime Minister Alexander Novak said Thursday Russia is currently generating 9.9 million b/d of crude – its ceiling through November under the OPEC-plus pact. However, he said Russia has the capacity to quickly increase that figure to 11.4 million b/d beginning as soon as December.

Meanwhile, President Biden’s administration has in recent days engaged with U.S. oil and gas producers to discuss more aggressive near-term increases in production to help alleviate price concerns, Reuters reported Thursday. However, it may take several months to complete wells and deliver substantially more oil and gas to the market.