Oil prices rose early on Friday, supported by an overall bullish market sentiment after the U.S. and Chinese presidents held a phone call to discuss various issues of strategic interest.
As of 9:32 a.m. EDT on Friday, WTI Crude was up 2.48% at $69.80. Brent Crude had risen by 2.25% to trade at above $73 a barrel, at $73.02.
Oil and equity markets jumped today after U.S. 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 U.S. Gulf of Mexico following Hurricane Ida was also lending support to oil prices on Friday.
As of Thursday, as many as 1.4 million barrels per day (bpd), or 76.48 percent 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, gasoline, and distillate inventory draws reported by the 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 on Thursday. But by Friday, analysts started to look at what the release could mean for future Chinese oil purchases. While not great for sentiment now, some analysts think it could herald a rise in Chinese demand in the coming months.
The release of crude from reserves “for the first time can be seen as bullish as it’s in preparation for the demand bump in 4Q,” Bloomberg quoted analytics company Oilytics as saying in a report. Inventories “will have to be eventually replaced so demand is just getting deferred,” according to the report.
By Tsvetana Paraskova for Oilprice.com
ADVERTISEMENT
More Top Reads From Oilprice.com:
- 3 Bearish Catalysts For Oil This Fall
- Why Hedge Funds Are Turning Bullish On Oil Again
- The Major Problem With EVs No One Is Talking About
Coming at a time the global economy and China’s are growing at 6.3% and 8.3% respectively this year with the US economy showing signs of recovery, this could have a strong bullish impact on the market provided it goes much further than a phone call.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London