Oil prices rose on Friday on growing signs of tightness in U.S. markets after Hurricane Ida hit offshore output, although benchmarks were heading for weekly losses of about 1% after China announced plans to sell crude from its strategic reserves.
U.S. West Texas Intermediate (WTI) crude futures for October rebounded to $69.71 a barrel, up $1.79, or 2.63%.
Brent crude futures for November rose $1.56, or 2.19%, to $72.88 a barrel.Brent is headed for a second straight weekly loss.
Both contracts fell more than 1% to settle at their lowest since Aug. 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 U.S. Gulf of Mexico.
Royal Dutch Shell Plc, the largest oil producer in the U.S. 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 also still offline.
To cushion the impact, the U.S. Energy Department said on Thursday it has approved a second loan of 1.5 million barrels of oil to Exxon Mobil Corp from the Strategic Petroleum Reserve (SPR).
Still some U.S. airlines, key to a recovery in jet fuel demand, warned of a slowdown in ticket sales.
American Airlines, United Airlines Holdings Inc, Delta Air, Southwest Airlines Co 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.