Prices hit almost 3-year high as oil supply tightens
Oil prices rose for the third week in a row on Friday, hitting their highest level in almost three years, as global production cuts forced energy companies to pull large volumes of crude from oil stocks.
The oil rally was mildly suppressed by China's first public sale of state-owned crude oil reserves.
Brent futures rose 84 cents, or 1.1%, to $78.09 a barrel, while West Texas Intermediate (WTI) crude rose 68 cents, or 0.9%, to $73.98 a barrel.
This was the highest close since October 2018 for Brent and since July 2021 for WTI, both for the second consecutive day. Weekly basis, it rose week three for Brent and week five for WTI, mostly caused by Hurricane Ida's effect with US Gulf Coast production cuts.
NY ULSD futures also hit a nearly three-year high. New York Harbor Ultra Low Sulfur Diesel (ULSD) futures closed at the highest level since October 2018.
As oil prices close another week of gains, the market is pricing in the long-term impact of supply cuts and possible product withdrawals from stocks that will be needed to meet refinery demand.
Some cuts, which have already led to sharp declines in US and global stockpiles, could last for months.
Traders say US oil refineries are turning to Iraqi and Canadian oil to replace Gulf crude.
India's oil imports peaked. India's crude imports rose to a three-month high in August, rebounding from a one-year low in July.
Some members of the Organization of the Petroleum Exporting Countries and their allies struggles to increase production during the pandemic due to insufficient investment or maintenance delays.
While Russian gas giant Gazprom has been accused of doing little to increase gas supplies to Europe where prices are soaring, Russia said it will remain a reliable energy supplier to global markets.
Iran, which wants to export more oil, said it would return to talks "very soon" to restart compliance with the 2015 Iran nuclear deal, but did not give a firm date. However, this seems highly unlikely to happen in 2021.
The number of US oil/gas rigs rose in the 14th month. According to Baker Hughes, drillers added 10 oil rigs this week, increasing the number of oil and gas rigs for the 14th consecutive month.
Some analysts say Brent could reach $80 by the end of September due to oil stock draws, low OPEC production and strong Middle East demand.
The first public sale of China's state oil reserves capped crude oil price increases. According to sources, PetroChina and Hengli Petrochemical purchased four cargoes totaling approximately 4.43 million barrels.
Analysts also noted that debtor Chinese giant Evergrande remains a risk to oil prices after the company warned that its electric car unit faces an uncertain future if it doesn't get a quick cash injection.
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