Singapore: Oil rose on Monday, with Brent touching the highest in five months, underpinned by a 30 per cent cut in Abu Dhabi crude supplies and encouraging Chinese data even as global demand struggles to return to pre-COVID-19 levels in a well supplied market.
Brent crude futures for November advanced to $46.38 a barrel earlier - the highest since March. US West Texas Intermediate crude was at $43.25 a barrel, up 28 cents. Brent is set to close out August with a fifth successive monthly price rise while WTI is on track for a fourth monthly gain, having hit a five-month high of $43.78 a barrel on August 26 when Hurricane Laura struck.
UAE's 30% cut
Abu Dhabi National Oil Company told customers on Monday that it will reduce October supplies by 30 per cent, up from a 5 per cent cut in September, as directed by the UAE government to meet its commitment on the recent OPEC+ agreement.
"With demand gradually recovering, this will allow the market to better absorb the inventory glut from earlier this year," OCBC's economist Howie Lee said.
A weak US dollar and a survey on Monday showing surprisingly strength in China's services sector supported oil prices even though fuel demand has struggled to recover amid the coronavirus pandemic and supplies remain ample, analysts say, cautioning of hurdles for crude going forward.
"Oil is likely to slowly grind higher in modest steps, not explode out of the wellhead higher," OANDA's Asia-Pacific analyst Jeffrey Halley said.
China's crude imports in September are set to fall for the first time in five months as record volumes of crude are stored in and outside of the world's largest importer, data from Refinitiv and Vortexa showed.
A US lift
Higher oil and gas prices are also encouraging US producers to resume drilling as the country's oil and gas rig count rose by three to 254 in August, according to data from energy services firm Baker Hughes Co.
Separately, Saudi Aramco discovered two new oil and gas fields in the northern regions, the kingdom's energy minister said on Sunday, state news agency SPA reported