Oil touches six-week high with U.S. supply still hit by weather

Image: Shell

Oil rose to its highest level in just under six weeks as investors tracked the slow restoration of supplies in the Gulf of Mexico and the outlook for demand and inventories over the fourth quarter.

WTI rose 0.9% to $70.31/bbl by 12:23 p.m. in London. Brent advanced 0.7% to $73.40/bbl.

Almost half of crude output in the U.S. Gulf of Mexico — about 884,000 barrels a day — had yet to resume after Hurricane Ida as of Sunday, according the latest statement from the Bureau of Safety and Environmental Enforcement. Tropical Storm Nicholas is over the western side of the Gulf and is about to menace Texas. Louisiana declared a state of emergency ahead of the latest storm.

Traders are also awaiting additional import quotas for China’s private refiners, which could spur renewed purchases in the physical market in the coming weeks. One company was granted permission to import a set volume of crude last week, and quotas for other refiners are expected imminently.

Crude will likely lead a rally in commodities next quarter amid strong demand and “growing scarcity” of supply, according to Goldman Sachs Group Inc. That’s despite plans by the OPEC+ alliance to continue gradually restoring output, and China’s unprecedented release of crude from stockpiles.

“The broader global oil-demand picture is showing signs of normalizing on the back of rising mobility trends,” said Stephen Brennock, an analyst at brokerage PVM Oil Associates. “As OPEC+ is firmly in control of supply, and maintaining its cautious stance, the crude market should continue to tighten further in the year-end period.”

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