By Adedapo Adesanya
Bullish sentiment pushed oil prices up on Friday as a combination of supply disruptions and an apparent compromise between the United States and China gave the markets hope.
Brent crude gained $1.34 or 1.88 per cent yesterday as it traded at $72.82 per barrel, while the US West Texas Intermediate (WTI) moved up by $1.49 or 2.17 per cent to $69.78 per barrel.
The markets jumped after it was revealed that US President Joe Biden and Chinese President Xi Jinping spoke on Thursday and “had a broad, strategic discussion in which they discussed areas where our interests converge, and areas where our interests, values, and perspectives diverge,” as the White House said.
The markets hope the call could lead to more trade between the world’s two largest economies, which is expected to boost oil demand.
The continued large outage in the oil production in the US Gulf of Mexico following Hurricane Ida was also lending support to oil prices on Friday.
As many as 1.4 million barrels per day or 76.5 per cent of the oil production in the Gulf of Mexico continued to be offline, data from the Bureau of Safety and Environmental Enforcement (BSEE) showed.
The crude inventory draws reported by the Energy Information Administration (EIA) on Thursday also pushed oil prices higher on Friday, despite the fact that this week’s inventory report was distorted by Hurricane Ida’s impact on crude and gasoline stocks with production and refining capacity offline due to the storm.
China’s unexpected release of crude from its reserve to alleviate raw material price pressures had depressed oil markets previously.
The State Bureau of Grain and Material Reserves said it would release batches of oil for sale to domestic refining and chemicals companies to “alleviate the pressure of rising raw material prices”.
“Putting national reserve crude oil on the market through open auction sales will better stabilise domestic market supply and demand and effectively guarantee national energy security,” it said.
While other large oil importers like the US have periodically tapped their national reserves during supply disruptions or to meet budgetary needs, it is the first time China has publicly announced its intention to draw on its stocks.
Analysts started to look at what the release could mean for future Chinese oil purchases with some thinking it could signify a rise in Chinese demand in the coming months.
Brent was on track to end the week with a small gain and has rallied almost 40 per cent this year, driven by supply cuts by the Organisation of the Petroleum Exporting Countries (OPEC) and some demand recovery from the pandemic.
Dipo Olowookere