Oil on track for third weekly gain

London — Oil was on track for a third weekly gain as supply tightness spearheaded by Saudi Arabian production cuts combines with optimism that the Chinese economy is finally turning a corner.

Saudi Arabia, boosted byOpec+ partner Russia, this month extended 1.3-million barrels per day (bpd) of combined cuts to the end of the year, accelerating a drawdown in global inventories.

The supply concerns have pushed the Brent and West Texas Intermediate (WTI) crude benchmarks to their highest levels since November.

China, the world’s biggest oil importer, is considered crucial to oil demand growth over the rest of the year. Its economy’s sluggish post-pandemic recovery has raised demand concerns, but industrial output and retail sales grew at a faster than expected rate in August.

Data on Friday also showed oil refinery processing rose by nearly a fifth from a year earlier as processors kept run rates high to capitalise on high global demand for oil products.

A brightening picture on borrowing costs is also emerging.

Though US headline inflation rose in August, the core figure moderated, foreshadowing a possible pause in interest rate hikes by the Federal Reserve next week. However, the US central bank is likely to leave the door open for a possible final increase in November.

The European Central Bank implemented a tenth consecutive increase this week but implied that it was likely to stop there.

“Betting on oil is becoming a favourite trade on Wall Street. No-one is doubting the Opec+ (oil output) decision at the end of last month will keep the oil market very tight in the fourth quarter,” said Oanda analyst Edward Moya. Oil prices were little changed at 10.48am GMT. Brent crude futures were up 37c at $94.07 a barrel while WTI was up 42c at $90.58.

Both benchmarks were up about 4% on the week. 

Reuters