Sonali Paul

MELBOURNE (Reuters – Friday’s oil prices rose by 4.2% on the back of signs from some sectors that they have started switching to higher priced oil. Also, there are doubts as to whether or not the U.S. will release any oil from strategic reserves.

U.S. West Texas Intermediate crude futures rose by 84cs or 1.1% to $79.14 per barrel at 0122 GMT

Futures rose 80c, or 1 percent, to $82.75 per barrel.

As the market climbed again, both contracts rose by about 1.1% Thursday. Both are expected to rise 4% next week.

Vivek Dhar, a Commonwealth Bank analyst said that oil prices rose after U.S Energy Department stated it doesn’t have a plan “at this point” to tap into U.S strategic oil reserves in order to slow the rise in oil prices.

However, a source from the U.S. Department of Energy said to Reuters that a Bloomberg journalist’s post on social media claiming the department had not considered tapping into SPR at this point was incorrect.

Soaring gas prices have prompted a shift towards oil by power generation, and some industries. OPEC+ has also decided, with the support of Russia and the Organization of Petroleum Exporting Countries, that it will continue to increase supply by 400,000 barrels daily in November.

Analysts say the main factor to monitor is the increase in gas prices, as well as the amount of fuel switching to oil from gasoline.

“An acceleration of gas-to-oil shifting could boost demand to generate power this coming winter,” ANZ commodities analyst stated in a note. He also noted that U.S. distillate stocks (which include diesel and ) are at their lowest point since 2000 as they head into winter.

Analysts at JP Morgan noted that there has not been any significant switching of gas to oil in Europe’s power sector.

JP Morgan analysts stated in a note that this means our estimation of 750,000 barrels of oil-to-gas switching demand per day under normal winter conditions may be substantially exaggerated.