LONDON: Oil prices rose more than 1% on Monday as tighter supply reflected in fewer exports from Saudi Arabia and Russia and high heating oil prices outweighed concern over global demand growth.
Brent crude climbed 86 cents, or 1%, to $85.66 a barrel by 1205 GMT and U.S. West Texas Intermediate crude was up $1.01, or 1.2%, at $82.26.
The September WTI contract expires on Tuesday and the more active October contract gained 88 cents, or 1.1%, to $81.54 a barrel.
Both front-month benchmark prices snapped a seven-week winning streak last week with a weekly loss of 2% on concern that China’s sluggish economic growth will curb oil demand while the possibility of further increases to U.S. interest rate also continues to cast a shadow over the demand outlook.
“We still see a tight oil balance for the remainder of the year, which suggests that prices still have some room to run higher,” said Warren Patterson, ING’s head of commodities research, adding that the dollar is also providing support.
A weaker dollar makes oil purchases less expensive for holders of other currencies, potentially boosting demand.
Another bullish factor is the high price of heating oil, which is in focus as the northern hemisphere approaches darker months, said John Evans of oil broker PVM.
However, what is like trying to hit a “flying insect with a bazooka” is determining whether the buoyant heating oil market is enough to rally the oil complex or just hold it in the face of broader macroeconomic concerns, he said.
Despite its economic woes, China is drawing on record inventories amassed earlier this year as refiners scale back purchases after prices were driven above $80 a barrel by supply cuts implemented by the OPEC+ group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia.
Saudi Arabia’s July shipments to China fell 31% from June while Russia, with its discounted crude, remained the Asian giant’s largest supplier, Chinese customs data showed.
“Unless there’s a recession and demand slows or drops, OPEC+ is in control,” said Stefano Grasso, a senior portfolio manager at 8VantEdge in Singapore.
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