By Adedapo Adesanya
Oil hit a 10-month high on Friday and posted a third weekly gain as supply tightness spearheaded by Saudi Arabian production cuts combined with optimism around Chinese demand to lift crude.
Brent crude futures rose by 23 cents or 0.3 per cent to settle at $93.93 a barrel, while the US West Texas Intermediate (WTI) futures were up by 61 cents or 0.7 per cent to close at $90.77 a barrel.
Supply concerns continue to be a driving force for prices since Saudi Arabia and Russia this month announced an extension of their combined supply cuts of 1.3 million barrels per day to the end of this year.
Market analysts noted that the supply cuts from the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) are starting to bite, and it looks like the market is heading for a pretty significant supply deficit, which translates to bullishness for prices.
Prices also gained support following China’s latest industrial output report, which showed faster-than-expected growth in August.
Industrial output in the world’s largest oil importer grew 4.5 per cent in August from a year earlier, accelerating from the 3.7 per cent pace seen in July, suggesting that the recent flurry of support measures may be starting to stabilise a stumbling economic recovery slowly.
Retail sales, a gauge of consumption, also grew at a faster 4.6 per cent pace in August, aided by the summer travel season and was the quickest growth since May compared with a 2.5 per cent increase in July.
Data on Friday showed Chinese oil refinery processing rose by nearly 20 per cent from a year earlier as processors kept run rates high to capitalise on high global demand for oil products.
Also, the International Energy Agency (IEA) forecasted peak oil demand before 2030, which prompted an immediate reaction from OPEC.
Consistent data-based forecasts show that peak oil and other fossil fuel demand will not happen before 2030, as the Paris-based agency claimed earlier this week, OPEC said on Thursday, dismissing the claims of the “beginning of the end of fossil fuels.”
Despite warnings about peak oil demand in recent years, all based on EV penetration rates that have so far failed to materialize, global oil demand has continued to rise, hitting a record this year, per the IEA itself.
The US oil rig count rose by two this week to 515, the most since April, data from oilfield services firm Baker Hughes showed on Friday. However, the data showed that the oil rig count is down by 84 units compared to a year ago.
Dipo Olowookere