Oil hits highest in almost 3 years as supply tightens

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imageCommodities1 hour ago (Sep 24, 2021 01:54PM ET)

(C) Reuters. FILE PHOTO: A worker collects a crude oil sample at an oil well operated by Venezuela’s state oil company PDVSA in Morichal, Venezuela, July 28, 2011. REUTERS/Carlos Garcia Rawlins/File Photo

By Scott DiSavino

NEW YORK (Reuters) – Oil prices rose to a near three-year high on Friday as they headed for a third straight week of gains, supported by global output disruptions and inventory draws.

The rally was slightly dampened by China’s first public sale of state crude reserves.

Brent futures was up 88 cents, or 1.1%, to $78.13 a barrel by 1:15 p.m. EDT (1715 GMT), while U.S. West Texas Intermediate (WTI) crude rose 84 cents, or 1.2%, to $74.14.

That put Brent on track for its highest close since October 2018 for a second day in a row and WTI on track for its highest close since July this year, also for a second day.

It would be the third week of gains for Brent and the fifth for WTI mostly due to disruptions in U.S. Gulf Coast output after Hurricane Ida in late August.

New York Harbor Ultra Low Sulfur Diesel (ULSD) futures also rose to their highest since October 2018.

“As oil prices are on track to close another week of gains, the market is pricing in a prolonged impact of supply disruptions, and the likely storage draws that will be needed to fulfill refinery demand,” said Louise Dickson, senior oil markets analyst at Rystad Energy.

Some disruptions could last for months and have already led to sharp draws in U.S. and global inventories. [EIA/S]

U.S. oil refiners were hunting to replace Gulf crude, turning to Iraqi and Canadian oil, traders said.

India’s crude oil imports rose to a three-month peak in August, rebounding from July’s near one-year low.

Some members of the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, have also struggled to raise output due to under-investment or maintenance delays during the pandemic.

Russia said it will remain a reliable supplier of energy to global markets in response to accusations Russian gas giant Gazprom (MCX:GAZP) was not doing enough to increase its natural gas supplies to Europe, where prices have soared.

Iran, which wants to export more oil, said it will return to talks on resuming compliance with the 2015 Iran nuclear deal “very soon”, but gave no specific date.

Kazakhstan’s biggest oil producer, Chevron-led Tengizchevroil (TCO), will delay components of its $45.2 billion expansion project by three to seven months, the country’s energy ministry said on Friday.

In the United States, meanwhile, drillers added 10 oil rigs this week, putting the oil and gas rig count up for a 14th month in a row.

Brent could hit $80 by the end of September due to stock draws, lower OPEC production and stronger Middle East demand, UBS analysts wrote.

But China’s first public sale of state oil reserves capped crude price gains. PetroChina and Hengli Petrochemical bought four cargoes totaling about 4.43 million barrels, sources said.

Analysts also noted indebted China Evergrande remains a risk to rising oil prices after the company’s electric car unit warned on Friday it faced an uncertain future unless it got a swift injection of cash.

Oil hits highest in almost 3 years as supply tightens