Oil ended the week on a high note despite a major intervention by China, the world's largest importer of the commodity, that is set to lead to additional supply in the market.
Brent, the international benchmark for crude, settled 2.06 per cent higher at $72.92 per barrel on Friday. West Texas Intermediate, which tracks US crude grades, closed the week 2.32 per cent higher at $69.72 per barrel.
Oil prices rose in spite of the move by Beijing to lower prices by releasing crude stockpiles from its strategic reserves.
The world's second-largest economy is battling surging energy costs for oil, coal and natural gas, which have forced factory output to shut in rural areas of the country.
The move was undertaken to “ease the pressure of rising raw material prices”, the National Food and Strategic Reserves Administration said on Thursday.
China has one of the largest strategic reserves of crude in the world, estimated at 220 million barrels, according to UK-based consultancy Energy Aspects.
The US, the world's largest producer of oil and gas, has the largest reserves, estimated at 727 million barrels, equivalent to 60 days of oil imports. Countries stockpile oil to meet emergency requirements as well as to tide over vagaries in the oil market. This is the first time Beijing has used it as a measure to lower prices.
Last year, at the height of the Covid-19 induced demand crunch, the country's Department of Energy resorted to buying crude from shale producers to help support them.
“Crude prices are rising on optimism Chinese demand is improving and that sweeping legislation could keep the oil market tight. The energy market is still digesting the Chinese crude intervention news and trying to figure out if the Biden/Xi call will lead to a more positive environment for risk appetite,” said Edward Moya, senior market analyst for the Americas at Oanda.
On Friday, US President Joe Biden and his Chinese counterpart Xi Jinping held their first phone conversation in seven months in a bid to stave off possible confrontation between the world's biggest economies.
Under former president Donald Trump, relations between Washington and Beijing soured due to a protracted trade war that weighed on energy and commodity prices.
Oil prices also remained tight as Congressional Democrats advanced legislation to combat climate change that will curb offshore exploration for hydrocarbons.
“The crude supply outlook might keep the oil market tight as the House tries to deliver sweeping legislation that could cripple offshore drilling. While the House might support the legislation to address climate change, the Senate’s conservative democrats might baulk at the bill,” Mr Moya said.
Opec is also set to lower its demand forecast for crude later this week – its first revision in months, according to reports.
The group, alongside non-members led by Russia, is gradually adding supply to the market as it looks to ease cuts that were agreed as part of a historic pact to cut production last year.
Opec+, as the supergroup is known, approved plans to add 400,000 barrels per day back to the market in September as part of its aim to increase it to 2 million bpd by the end of the year.
The group is set for a ministerial meeting on October 1 to discuss the next phase of its supply pact.