Oil edges up on Chinese demand, but weekly losses loom

crude oil prices

Oil prices edged up on Friday, helped by rising Chinese crude demand and threats of a strike in Africa’s largest oil exporter.

But prices were still on track for weekly losses amid concerns that rising U.S. production could undermine OPEC-led supply cuts.

By 1341 GMT, Brent crude was up $1.04 cents at $63.24 a barrel, but heading for a weekly slide of just under 1 percent.

U.S. West Texas Intermediate (WTI) crude was at $56.66 a barrel, up 97 cents from their last settlement. The contract was on track for a 1.2 percent loss on the week.

China’s crude oil imports rose to 9.01 million barrels per day (bpd), the second highest on record, data from the General Administration of Customs showed on Friday.

Booming demand will push China ahead of the United States as the world’s biggest crude importer this year.

U.S. investment bank Jefferies forecast 2018 global oil demand growth of 1.5 million bpd, driven by almost 10 percent demand growth in China.

“Generally speaking, the market is looking more healthy than sick,” said Analyst with PVM Oil Associates, Tamas Varga.

Varga said threats of a strike later this month from a union in Nigeria, Africa’s largest oil exporter, was supportive, as was reduced flow along the Britain’s Forties oil pipeline, one of the grades that sets Brent prices.

An extension to the end of 2018 of production cuts by the Organization of the Petroleum Exporting Countries, Russia and other producers underpinned the market.

The output cuts pushed oil prices higher between June and October, with Brent gaining around 40 percent.

“Even if you have no bullish view … OPEC and Russia have taken away the risk to the downside,” said Chief Commodities Analyst with SEB Bank, Bjarne Schieldrop, adding it was unlikely that Brent would drop below $61 per barrel.

Still, data this week showed that U.S. crude output had risen 25,000 bpd to 9.71 million bpd in the week to Dec. 1, the highest production since the 1970s and close to the production levels of Russia and Saudi Arabia.

Exports also climbed to 1.73 million bpd in October, from 1.47 million bpd in September.

Analysts said this could cap prices and cut into other exporters’ market shares.

“The sharp reduction in Saudi Arabian crude oil shipments is not reflected in the Chinese import statistics, meaning that other suppliers such as Russia, Iraq or the U.S. are likely to have stepped into the breach,” Commerzbank said in a note.

Agency Report