LONDON – Oil prices rose on Thursday, supported by growing fuel demand and a draw in U.S. crude inventories as production remained hampered in the Gulf of Mexico after two hurricanes.

Oil prices at two-month highs on tight supplies- oil and gas 360

Source: Reuters

Brent crude was up 28 cents, or 0.4%, to $76.47 a barrel at 1336 GMT (9:36 a.m. EDT). U.S. West Texas Intermediate (WTI) crude rose 43 cents, or 0.6%, to $72.66 a barrel.

Earlier in the session, Brent rose to $76.53 a barrel, its highest level since mid-July.

“Oil prices continue to thrive on the momentum of supply constraints in the U.S. Gulf of Mexico, which was reflected in the large crude inventory draws report of last week,” said Rystad Energy analyst Louise Dickson.

Both contracts jumped 2.5% on Wednesday after data from the U.S. Energy Information Administration showed U.S. crude stocks in the week to Sept. 17 fell by 3.5 million barrels to 414 million – the lowest total since October 2018. [EIA/S]

Oil also found some support as several members of the Organization of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+, struggled in recent months to raise output due to years of under-investment or delays to maintenance work because of the coronavirus pandemic.

Iraq’s oil minister said on Wednesday OPEC+ was working to keep crude prices close to $70 per barrel as the global economy recovers. The group will meet on Oct. 4.

The dollar, which usually has an inverse relationship with commodities prices, including oil, eased slightly from a one-month high, after the Federal Reserve signalled it would soon start to reduce its monthly bond purchases and set the stage for higher interest rates next year, but left enough breathing room to slow things down if necessary.

The U.S. central bank “gave advance notice of its tapering intention, thereby confirming its economic optimism, which ultimately points to robust U.S. oil demand”, said Barbara Lambrecht, analyst at Commerzbank (DE:CBKG).

The oil market was also supported by a return of appetite for risk assets as concerns eased over a possible near-term default by Chinese property developer China Evergrande on its dollar bonds.

In a sign of strong fuel demand as travel bans ease, East Coast refinery utilisation rates in the United States rose to 93%, the highest level since May 2019, EIA data showed.

Market sentiment is also being supported by surging natural gas prices, ANZ Research said.

“Supply shortage of gas could encourage power utilities to shift from gas to oil if winter turns out to be colder this year,” ANZ analysts wrote in a note.

Natural gas prices have risen sharply around the globe in recent months due to a combination of factors, including increased demand particularly from Asia as it enters its post-pandemic recovery, low gas inventories, and tighter-than-usual gas supplies from Russia.

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