Oil prices rise on supply disruptions, China demand

NEW YORK: Oil prices rose, boosted by supply disruptions in the Middle East and signs of rising Chinese demand, with front-month US crude leading gains as it rebounded from five sessions of declines.
Brent crude recovered from its lowest close in more than a month, but trading was more active in the New York market, with prompt-month September West Texas Intermediate (WTI) rising $1.85 a barrel.
The premium for September crude over December futures widened by 70 cents to $3.60, intensifying a market structure known as backwardation.
Analysts cited upbeat data from China and more signs of a sharp fall-off in Libyan oil exports.
Market watchers also said that a rush to secure long positions in the front month contract ahead of the weekend also contributed to the rally.
“It doesn’t seem like you want to sell the market now — a lot of big traders are long in the front month, and you don’t want to go against that,” said Richard Ilczyszyn, the chief market strategist and founder of Chicago’s iitrader.com.
US oil futures for September delivery climbed $2.24 to trade at $105.66 by 1645 GMT. Brent crude oil rose 89 cents to $107.57. The North Sea benchmark’s premium to its US counterpart narrowed to around $1.94.
China’s factory output grew in July at its fastest pace since the start of the year, adding to a run of data suggesting the world’s second-largest economy may be stabilizing after more than two years of slumping growth. Crude oil imports rose to a record, although implied oil demand softened from a four-month high in June.
“Weíre bouncing back from five sessions of losses,” said Joseph Posillico, senior vice president of energy derivatives at Jefferies Bache in New York.
“The bullish numbers are pushing us up, and (traders) generally go long in the front two months, and thatís going to lend strength in the spreads as well.”
The International Energy Administration said it expected Libya’s oil output to show a fall of 600,000 barrels per day to 400,000 bpd in early August, its lowest since the 2011 conflict.
“Today was the second day we heard positive news in China,” said Gene McGillian, an analyst with Tradition Energy in Stamford, Connecticut.
“We also continued to see problems in Libya, and there were rumors that Sudan is going to shut down its exports.”
US investment bank Goldman Sachs maintained its 12-month forecast for Brent oil at $105 a barrel on Friday but said tighter OPEC supplies and a rise in Chinese net crude oil imports would push prices up in the near term.
Both the Brent and US benchmarks were on course to post a weekly loss as investors closed their positions before September, when the US Federal Reserve is expected to start paring back its massive stimulus program.
Concerns that delays to oil supplies in the North Sea as well unrest in Middle Eastern OPEC producers could persist or even worsen have boosted prices, analysts said.
Adding to worries over tightening supplies, a report from the International Energy Agency suggested America’s shale oil boom was protecting the world from steep oil price spikes as several OPEC members struggle to maintain production due to unrest and infrastructure problems.
A report from the Organization of the Petroleum Exporting Countries painted a similar picture on Friday.