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Oil rallies as tight US supplies offset plan to sell off Chinese reserves

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A gas station attendant prepares to refuel a car in Rome, Italy, January 4, 2012. REUTERS / Max Rossi

  • China plans to auction state oil reserves to help refiners
  • Shell cancels some U.S. crude exports after hurricane hits production
  • US approves second crude loan to SPR’s Exxon Mobil

SINGAPORE, Sept. 10 (Reuters) – Oil prices rose on Friday following increasing signs of strain in US markets after Hurricane Ida hit offshore production, although benchmarks were heading for weekly losses by nearly 1% after China announced plans to sell crude from its strategic reserves.

Brent crude futures for November rose 63 cents, or 0.9%, to $ 72.08 a barrel at 0624 GMT. US West Texas Intermediate (WTI) crude futures for October stood at $ 68.65 a barrel, up 51 cents, or 0.8%.

Brent is heading for a second straight weekly loss.

Both contracts fell more than 1% Thursday to their lowest level since August 26 after China said it would release crude oil reserves into the market via public auctions to ease the pressure high raw material costs on domestic refiners, in a move that has been described as a first. Read more

Some analysts said the announcement was likely made to confirm the sale of reserves in July and August.

“While this sale likely weighed on China’s crude imports this summer, alongside the exhaustion of teapot import quotas, we expect further limited reductions in China’s onshore crude stocks this year and a pick-up in higher imports late in the year as demand picks up seasonally and following the recent COVID-19 outbreak, “Goldman Sachs analysts said in a note.

Energy Aspects analyst Liu Yuntao said the release of the reserve came as the Chinese majors had to replace supplies they had purchased for September and October loadings from Shell in the Gulf of Mexico in the United States.

Royal Dutch Shell Plc (RDSa.L), the largest Gulf of Mexico oil producer in the United States, has canceled some export shipments due to Ida’s damage to offshore facilities.

Nearly 1.4 million barrels per day (bpd) of offshore oil production remains stranded in the Gulf of Mexico and 1 million bpd of refining capacity is also still offline. Read more

To cushion the impact, the US Department of Energy said Thursday it had approved a second loan of 1.5 million barrels of oil to Exxon Mobil Corp’s (XOM.N) Strategic Petroleum Reserve (SPR). Read more

On the demand side, some US airlines, key to a recovery in jet fuel markets, have warned of slowing ticket sales.

American Airlines (AAL.O), United Airlines Holdings Inc (UAL.O), Delta Air, Southwest Airlines Co (LUV.N) and JetBlue Airways (JBLU.O) said ticket sales slowed and lowered forecasts in revenue due to increase in COVID-19 cases threaten to block travel resumption. Read more

Reporting by Florence Tan in Singapore and Sonali Paul in Melbourne; Editing by Himani Sarkar and Kim Coghill

Our standards: Thomson Reuters Trust Principles.

Sources

1/ https://Google.com/

2/ https://www.reuters.com/business/energy/oil-slips-chinas-plan-release-crude-reserves-airline-demand-woes-2021-09-10/

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