Oil is heading for new weekly gains with tight supply and optimism towards China

Oil is heading for gains for the third week in a row, as the scarcity of supply resulting mainly from Saudi Arabia’s reduction in production coincides with optimism that the Chinese economy is finally beyond the stage of danger.

By 1149 GMT, Brent crude rose 37 cents to $94.07 a barrel, and US West Texas Intermediate crude rose 43 cents to $90.59.

The two crude oil prices rose about four percent during the week.

This month, Saudi Arabia, along with Russia, its partner in the OPEC+ alliance, extended a total reduction of 1.3 million barrels per day until the end of the year, which led to an acceleration of the withdrawal from global stocks.

Concerns about supplies pushed Brent and US crude to their highest levels since November.

China, the world’s largest oil importer, is considered a crucial element in the growth of oil demand during the rest of the year. The slow recovery of its economy after the pandemic has raised concerns about demand, but it recorded faster-than-expected growth in industrial production and retail sales in August.

Data on Friday also showed that processing operations in oil refineries rose by about a fifth compared to a year ago, in light of maintaining high operating rates to benefit from increased global demand for petroleum products.

But borrowing costs appear to paint a bright picture.

Although the US inflation rate rose in August, core inflation declined, indicating the possibility that the Federal Reserve will stop raising interest rates next week, but will likely leave the door open. There is a possible final hike in November.

The European Central Bank raised interest rates for the tenth time in a row this week but implied that it was likely to stop there.