Oil prices hit two-month high on rising fuel demand

Agencies New York Oil prices rose on Thursday, supported by growing fuel demand and a draw in US crude inventories as production remained hampered in the ...

Agencies New YorkOil prices rose on Thursday, supported by growing fuel demand and a draw in US crude inventories as production remained hampered in the Gulf of Mexico after two hurricanes.Supply concerns had funds taking longer positions, analysts said.Brent crude was up 90 cents, or 1.8 percent to $77.10 a barrel on Thursday, highest since mid-July. US West Texas Intermediate (WTI) crude rose $1.03, or 1.5%, to $73.28 a barrel.“The reality is setting in - there’s more talk about global inventories tightening and there are concerns about supply issues going into winter,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. Additional support may come as the White House takes a tougher line on Iran, he said.On Wednesday, both contracts jumped 2.5 percent after the US Energy Information Administration reported US crude stocks in the week to September 17 fell by 3.5 million barrels to 414 million - the lowest since October 2018.Also supporting prices, some members of the Organization of the Petroleum Exporting Countries (OPEC) and allied producers, have struggled to raise output after years of under-investment or delays to maintenance work during the pandemic. Iraq’s oil minister said OPEC+ was working to keep crude close to $70 per barrel as the global economy recovers. The group will meet on October 4.Iran’s export capabilities partially hinge upon reviving its 2015 nuclear deal. The window remained open but Tehran has not indicated whether it is willing to resume talks in Vienna, a senior US official said. The dollar, which usually has an inverse relationship with commodities prices, eased from a one-month high after the Federal Reserve signalled it would soon start reducing its monthly bond purchases and set the stage for higher interest rates next year, but left room to slow things if needed. The US central bank “gave advance notice of its tapering intention, thereby confirming its economic optimism, which ultimately points to robust US oil demand”, said Barbara Lambrecht, analyst at Commerzbank.Oil prices also drew support as concerns eased over a possible near-term default by Chinese property developer China Evergrande on its dollar bonds. In a sign of strengthening fuel demand, East Coast refinery utilisation rates in the United States rose to 93 percent, the highest since May 2019, EIA data showed. Surging natural gas prices also are supporting market sentiment, ANZ Research said.“Supply shortage of gas could encourage power utilities to shift from gas to oil if winter turns out to be colder this year,” ANZ analysts wrote in a note.Natural gas prices have surged around the globe in recent months due to factors including increased demand particularly from Asia as it recovers from the pandemic, low gas inventories, and tight gas supplies from Russia.Soaring gas prices are the cost of the attempted shift to renewable energy sources, OPEC Secretary General Mohammed Barkindo told CNBC on Tuesday. “I have talked about a new premium that is emerging in the energy markets that I term the transition premium,” Barkindo told CNBC’s Dan Murphy at the Gastech conference in Dubai. Many governments around the world and particularly in the West are pushing for a shift away from fossil fuel use, while those in the industry argue that a rapid transition attempt will disrupt markets, harm consumers, and is ultimately unrealistic. Global gas prices have tripled this year alone, sending ripples through markets and raising concerns that prices of the commodity will only continue to rise.