Oil rose to briefly top $73 a barrel on Friday, supported by growing signs of supply tightness in the United States as a result of Hurricane Ida and as U.S.-China trade hopes gave riskier assets a boost.
About three quarters of the U.S. Gulf’s offshore oil production, or about 1.4 million barrels per day, has remained halted since late August. That is roughly equal to what OPEC member Nigeria produces.
“The market is back to focusing on the tighter supply situation globally, and that is giving it a boost,” said Phil Flynn, senior analyst at Price Futures group in Chicago. While China is releasing oil from its strategic petroleum reserve, the amount is more than offset by reduced production in the Gulf of Mexico, Flynn added.
Brent crude rose $1.36, or 1.9%, to $72.81 by 1:02 p.m. ET (1702 GMT). The session high was $73.15 a barrel. U.S. West Texas Intermediate (WTI) crude rose $1.43, or 2.1%, to $69.56.
Brent was on track for a small weekly gain and has rallied 41% this year on supply cuts by the Organization of the Petroleum Exporting Countries and some demand recovery from the pandemic.
Oil and equity markets also got a boost from news of a call between U.S. President Joe Biden and his Chinese counterpart Xi Jinping. The call raised hopes for warmer relations and more global trade, analysts said. [MKTS/GLOB]
“The Biden-Xi phone call has had the same effect on oil markets as it has on other asset classes,” said Jeffrey Halley, analyst at brokerage OANDA.
The United States added rigs in the latest week, energy service provider Baker Hughes said, indicating production may rise in coming weeks.
On Thursday, both crude contracts fell more than 1% after China said it would release crude oil reserves via public auction to help ease high feedstock costs for refiners.
In focus next week will be revisions to the oil demand outlook for 2022 from OPEC and the International Energy Agency. OPEC will likely revise down its forecast on Monday, two OPEC+ sources said.
Additional reporting by Florence Tan in Singapore and Sonali Paul in Melbourne; Editing by Elaine Hardcastle, Edmund Blair and David Gregorio