Oil heads to 3-1/2 month high as supply tightness

Oil heads to 3-1/2 month high as supply tightness

Oil prices climbed 1% on Thursday, recouping losses from the previous session, as supply tightness and expectations of stronger Chinese demand overrode concerns about an economic slowdown.

Brent crude futures advanced 72 cents, or 0.9%, to 83.64 barrel by 0522 GMT, while U.S. West Texas Intermediate (WTI) crude rose to $79.56, up 78 cents, or 1%, heading towards their highest levels since April 19.

Oil prices declined on Wednesday after data showed U.S. crude inventories fell less than expected and the Federal Reserve raised interest rates by a quarter of a percentage point, leaving the door open to another hike.

As the Fed’s move was well expected, the market focus is turning to the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, which holds its monthly Joint Ministerial Monitoring Committee meeting next week.

The committee’s outlook for demand will be key to whether de facto leader Saudi Arabia decides to extend its voluntary output cut of 1 million barrels per day (bpd) into September.

Saudi Arabia trimmed its output to 9 million bpd in July from around 10 million bpd, its biggest output reduction in years, and in early July said it would extend the cut to August.

Meanwhile, market sentiment remains buoyed by China’s vows earlier this week to take more steps to boost growth.

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