Oil Rallies on Chinese Import Boost and Mideast Tensions

Oil prices firmed on Friday as bullish news from strong Chinese oil imports to turmoil in the Middle East put Brent on track for a more than 3% weekly gain. The developments added to other signs that the market was finally rebalancing after years of excess.

Brent was at $57.42, up $1.17. US West Texas Intermediate crude was at $51.59 per barrel, up 99 cents from its last settlement. The contracts were on track for weekly gains of more than 3% and 4%, respectively, Reuters reported.

Chinese oil imports hit 9 million barrels per day in September, data showed on Friday. Imports averaged 8.5 million bpd between January and September, solidifying China’s position as the world’s biggest oil importer.

 “We woke up with the strong data from China. That’s on the supportive side,” Olivier Jakob, managing director of PetroMatrix, said.

China’s huge imports have been strongly driven by purchases for its strategic petroleum reserves.

The nation has spent around $24 billion on building its crude reserves since 2015 and now holds around 850 million barrels of oil in inventory, the International Energy Agency said.

Unrest in Iraq and the prospect of a tougher US action on Iran nuclear deal also underpinned prices.

On Friday, local television reported that tens of thousands of Kurdish fighters had deployed in the Kirkuk oil region to confront possible “threats” from Iraqi forces.

Tensions between the two, which traders fear could cut off oil exports from the region, have been building since Iraqi Kurds overwhelmingly backed independence in a Sept. 25 vote.

Despite the bullish signals, Bernstein Research said the Organization of Petroleum Exporting Countries needed to extend its agreement to reduce oil output beyond its current March 2018 expiry date in order to clear stocks.

OPEC, with other producers including Russia, has agreed to production cuts of 1.8 million bpd.

“OPEC will not achieve normalized inventory levels before cuts expire at the end of March,” Bernstein analysts said. “We believe an extension of cuts through 2018 should allow inventories to reach normalized levels before the end of 2018.”