Oil posted its biggest weekly gain since October as supply concerns continue amid tensions in the Middle East and prospects of higher demand boosted by positive economic growth in the US.
Brent, the benchmark for two thirds of the world’s oil, rose 1.36 per cent to close at $83.55 a barrel.
West Texas Intermediate, the gauge that tracks US crude, surged 0.84 per cent to settle at $78.01 a barrel.
“Lower US crude stockpiles (largely due to poor weather), the prospect of greater stimulus from China and elevated geopolitical tension in the Middle East have been the main factors behind the rise in oil price … but better than expected growth data from the US and the prospect of earlier monetary policy easing in Europe have also likely contributed to the improved sentiment,” Khatija Haque, head of research and chief economist at Emirates NBD, said.
Middle East tensions continued with Yemen's Houthi rebels attacking ships passing through the Red Sea – a main trade route connecting Asia and Europe – which raised concerns that the attacks could disrupt energy supplies from the Middle East producers.
On Friday, the Marlin Luanda, a petroleum products tanker vessel operated on behalf of Trafigura, was struck by a missile in the Gulf of Aden after transiting the Red Sea, according to the company's statement on its website.
QatarEnergy on Thursday said that liquefied natural gas deliveries may be delayed due to disruption in the Red Sea but said production had not been affected.
US crude inventories, an indicator of fuel demand, decreased by 9.2 million barrels in the week that ended on January 19, the data from the US Energy Information Administration showed, supporting oil prices.
Analysts polled by Reuters were expecting a drop of 2.2 million barrels.
“Oil bulls finally got the positive breakout that they were looking for in oil prices,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“The barrel of American crude cleared the $75 per barrel resistance and extended gains past $77 per barrel on the muddy geopolitical picture in the Middle East and on the back of a nine million barrel slump in US weekly oil inventories.”
US economic data as well as China’s stimulus measures have also helped oil prices to edge higher.
The US economy grew in the fourth quarter, despite the Federal Reserve increasing interest rates to tame inflation in the world’s largest economy.
Gross domestic product grew at a 3.3 per cent annual rate from October to December, down from the third quarter's bumper reading of 4.9 per cent, the Commerce Department reported on Thursday.
Despite the slowdown, economic growth still defied expectations. Economists surveyed by The Wall Street Journal projected US GDP to grow at an annualised rate of 2 per cent in the last quarter.
Oil benchmarks may “retain their upwards bias upon a further escalation in global geopolitical tensions, as well as more signals of economic support out of Chinese policymakers”, Han Tan, chief market analyst at Exinity, told The National.
On Wednesday, China's central bank announced a deep cut in bank reserves to release more liquidity to bolster stock valuations.
The move is expected to inject additional 1 trillion yuan ($140 billion) into the country’s banking system.
