Oil prices stayed bullish Friday as robust Chinese oil imports and turmoil in the Middle East put Brent on track for a nearly three percent weekly gain, as Brent traded at $57.20 up 95 cents.
The upheaval in Iraq and possible U.S. action on the Iran nuclear deal, we equally singled out for the upswing in oil prices. Tensions between the two, which traders fear could impinge on oil exports from the region, have been building since Iraq’s Kurds overwhelmingly backed independence in a Sept. 25 vote.
The developments added to others signal the market was finally rebalancing after years of excess. But analysts warned that the 2018 balance was still shaky.
Data showed that Chinese oil imports hit nine million barrels per day (bpd) in
September, with imports averaging 8.5 million bpd between January and
September, solidifying China’s position as the world’s biggest oil importer.
China’s huge imports have been strongly driven by purchases for its strategic petroleum reserves (SPR). The red dragon nation has spent around $24 billion on building its crude reserves since 2015 and now holds around 850 million barrels of oil in inventory, according to the International Energy Agency (IEA).
Later on Friday, U.S. President Donald Trump is expected to announce that he will not certify the 2015 Iran nuclear deal. The deal has to be re-certified every 90 days and is due for renewal on Sunday. The step would give the U.S. Congress 60 days to decide whether to impose sanctions, but Iran’s parliament speaker commented that decertification would “be the end” of the deal and could cause “global chaos”.
Despite the bullish signals, oil experts warned that the OPEC needed to prolong its agreement to cut oil output beyond its current March 2018 expiry date in order to clear stocks. OPEC, with other producers including Russia, had agreed to production cuts of 1.8 million bpd.
They added that OPEC-led cuts have breathed new life into oil bulls but unless the organization digs deeper, the drawdown in global oil stockpiles will soon wane out.