Oil tanks at an oil warehouse at Yangshan port in Shanghai, China. Picture: REUTERS/ALY SONG
Oil tanks at an oil warehouse at Yangshan port in Shanghai, China. Picture: REUTERS/ALY SONG

Singapore — Oil prices rose on Friday on growing signs of tightness in US markets after Hurricane Ida hit offshore output, though benchmarks were heading for weekly losses of about 1% after China announced plans to sell crude from its strategic reserves.

Brent crude futures for November rose 44c, or 0.6%, to $71.89 a barrel by 3.24am GMT. US West Texas Intermediate (WTI) crude futures for October was at $68.49 a barrel, up 35c, or 0.5%. Brent is headed for a second straight weekly loss.

Both contracts fell more than 1% to settle at their lowest since August 26 on Thursday after China said it would release crude oil reserves to the market via public auction to ease the pressure of high feedstock costs on domestic refiners, in a move that was described as a first.

Some analysts said the announcement had likely been made to confirm the sale of reserves in July and August.

“While this sale likely weighed on China’s crude imports this summer, alongside depleted teapot import quotas, we expect limited further draws in China’s onshore crude inventories this year and a resumption of higher imports into year-end as demand picks up seasonally and following the recent Covid-19 outbreak,” Goldman Sachs analysts said in a note.

Energy Aspects analyst Liu Yuntao said the release from the reserve came as Chinese majors had to replace supplies they had bought for September and October loadings from Shell in the US Gulf of Mexico.

Royal Dutch Shell, the largest oil producer in the US Gulf of Mexico, has cancelled some export cargoes due to Ida’s damage to offshore facilities.

Almost 1.4-million barrels per day (bpd) of offshore oil production remains shut in the Gulf of Mexico and 1-million bpd of refining capacity is still offline.

To cushion the impact, the US energy department said on Thursday it has approved a second loan of 1.5-million barrels of oil to ExxonMobil from the Strategic Petroleum Reserve (SPR).

Still some US airlines, key to a recovery in jet fuel demand, warned of a slowdown in ticket sales.

American Airlines, United Airlines Holdings, Delta Air, Southwest Airlines and JetBlue Airways said ticket sales had slowed and cut revenue forecasts as a surge in Covid-19 cases threatens to stall a recovery in travel.

Reuters

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