Oil prices ease but remain near two-month highs on tight supplies

Brent crude rose 9 cents, or 0.1%, to $76.28 a barrel at 0856 GMT

Image used for illustrative purpose. A view of the Johan Sverdrup oilfield in the North Sea, January 7, 2020. Carina Johansen/NTB Scanpix/via REUTERS

Image used for illustrative purpose. A view of the Johan Sverdrup oilfield in the North Sea, January 7, 2020. Carina Johansen/NTB Scanpix/via REUTERS

LONDON - Oil prices eased but remained well above $75 a barrel on Thursday, supported by growing fuel demand and a draw in U.S. crude inventories as production remained hampered in the Gulf of Mexico after two hurricanes.

Brent crude was down 24 cents, or 0.3%, to $75.95 a barrel at 1035 GMT. U.S. West Texas Intermediate (WTI) crude fell 28 cents, or 0.4%, to $71.95 a barrel.

Earlier in the session, Brent rose to $76.53 a barrel, the highest level since mid-July.

Both contracts jumped 2.5% on Wednesday after data from the U.S. Energy Information Administration showed U.S. crude stocks in the week to Sept. 17 fell by 3.5 million barrels to 414 million - the lowest total since October 2018.  "With Gulf of Mexico production returning slowly, and natural gas prices remaining sky high, the structural outlook for oil remains promising as OPEC+ struggles to meet even its current production quotas," said Jeffrey Halley, analyst at brokerage OANDA.

Several OPEC+ countries - including Nigeria, Angola and Kazakhstan - have struggled in recent months to raise output due to years of under-investment or maintenance work delayed by the pandemic. 

Iraq's oil minister said on Wednesday OPEC+ were working to keep crude prices close to $70 per barrel as the global economy recovers. The group will meet on Oct. 4.

The dollar, which usually has an inverse relationship with commodities prices including oil, eased slightly from a one-month high, after the U.S. Federal Reserve set the stage for rate hikes next year but left enough breathing room to slow things down if necessary. 

The Fed "gave advance notice of its tapering intention, thereby confirming its economic optimism, which ultimately points to robust U.S. oil demand", said Barbara Lambrecht, analyst at Commerzbank.

The oil market was also supported by a return of appetite for risk assets as concerns eased over a dollar bond interest payment due on Thursday from property developer China Evergrande. 

In a sign of strong fuel demand as travel bans ease, East Coast refinery utilisation rates in the United States rose to 93%, the highest since May 2019, EIA data showed.

Market sentiment is also being supported by surging natural gas prices, 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.

Gas prices have risen sharply around the globe in recent months due to a combination of factors, including increased demand particularly from Asia as it enters its post-pandemic recovery, low gas inventories, and tighter-than-usual gas supplies from Russia. 

(Reporting by Bozorgmehr Sharafedin in London, additional reporting by Sonali Paul in Melbourne and Koustav Samanta in Singapore; Editing by Muralikumar Anantharaman, Jason Neely and Emelia Sithole-Matarise) ((bozorgmehr.sharafedin@thomsonreuters.com; Twitter: @bozorgmehr;))

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