Oil climbed above $70 a barrel in New York yesterday after three weeks of gains as investors tracked the slow restoration of supplies in the Gulf of Mexico and the outlook for demand and inventories over the fourth quarter.
West Texas Intermediate added 1 per cent, while the global Brent benchmark neared the top of its recent trading range.
More than two weeks since Hurricane Ida slammed into the U.S. Gulf of Mexico, almost half of crude output in the key producing region has yet to resume, according to the Bureau of Safety and Environmental Enforcement.
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 to gradually restore output, and China’s unprecedented release of crude from stockpiles.
“The broader global oil-demand picture is showing signs of normalising on the back of rising mobility trends,” Stephen Brennock, an analyst at brokerage PVM Oil Associate said.
“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,” he said.
The aftermath of Ida has left about 1.1 million barrels of daily production shuttered in the Gulf of Mexico and it is unclear when that output will return, a bullish sign for oil, according to trading giant Vitol Group.
While inventories in key economies are lower, the pandemic remains a concern. In Asia, China is experiencing yet another COVID-19 outbreak caused by the delta variant, with dozens of infections detected in the southeastern province of Fujian less than a month after the nation’s last flare-up was contained.