(Bloomberg) -- Oil rose as investors focused on the lingering supply outages in the U.S. Gulf of Mexico and and China’s confirmation that it released crude from its strategic reserves.
Futures in New York jumped as much as 2.7% on Friday and are on track for a third straight weekly advance. More than a million barrels a day of U.S. offshore crude production remains shut in after Hurricane Ida swept through the area nearly two weeks ago. Meanwhile, China’s release of crude comes amid surging energy costs in the country not just for oil but also for coal and natural gas.
“The market is now laser focused on the supply situation in the U.S.,” said Andrew Lebow, senior partner at Commodity Research Group. “The losses from the extended outage in the Gulf are being felt more.”
Despite the uncertainty caused by China’s move, crude in New York has traded in a $4 band since late August. The market has been pulled in different directions with the majority of Gulf of Mexico production still shut from Hurricane Ida and falling American stockpiles acting as bullish triggers, countered by the ever-present pandemic.
Friday’s price move reflects some “buying back following the overreaction yesterday, amid ongoing support from supply disruptions,” said Giovanni Staunovo, commodity analyst at UBS Group AG.
China’s bold but vague declaration to release oil reserves from its massive strategic stockpiles has some traders questioning the lasting impact of such a move by the world’s biggest crude importer.
The National Food and Strategic Reserves Administration also said this week that a “normalized” rotation of crude oil in the state stockpiles is “an important way for the reserves to play its role in balancing the market,” indicating that it may continue to release barrels. It added that putting reserves on the market through open auctions “will better stabilize domestic market supply and demand.”
“China’s SPR is very healthy because they bought so much last year when prices were significantly lower,” said Lebow. “They may wait to replenish it.”
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