Oil Higher in Friday Trade

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures climbed again Friday morning, with West Texas Intermediate crude oil on course for a 5% weekly gain, underpinned by lower crude supply in the United States, a big jump in Chinese crude imports and concerns over mounting geopolitical risks in the Middle East.

The Energy Information Administration on Thursday reported domestic crude oil stocks were drawn down 2.7 million bbl during the week-ended Oct. 6, with crude production down 81,000 bpd from a 27-month high to a 9.48 million bpd one-month low.

This follows bullish monthly reports issued on Wednesday by EIA and the Organization of the Petroleum Exporting Countries that raised global demand outlooks while cutting estimated production from non-OPEC producers.

China reported overnight that its oil imports hit 9.0 million bpd in September, up from 8.0 million bpd in August. China's oil imports have averaged 8.5 million bpd between January and September, making China the world's biggest oil importer.

China's imports have increased as it restocks its strategic petroleum reserves. The latest data alleviated concerns that demand in China was easing due to economic pressure, analysts said.

Among the potential geopolitical risks concerning the market are unrest in Iraq's Kurdish region and possible U.S. action on the Iran nuclear deal. Reports said thousands of Kurdish fighters were deployed in the Kirkuk oilfields to confront possible threats from Iraqi forces.

Tensions between the regional Kurdish government and the national Iraqi government based in Baghdad have been simmering since the Kurds held a referendum for independence on Sept. 25. Traders fear the skirmishes could disrupt 500,000 bpd in oil exports from the Kurdish region.

Later today, President Donald Trump is expected to announce that he will not certify the 2015 Iran nuclear deal. The agreement must be re-certified every 90 days and is due for renewal on Sunday.

Failure to certify the deal means that within the next 30 days Congress could impose sanctions on Iran that were lifted in 2015 in exchange for Tehran's promise to suspend its nuclear program. Iran, an OPEC member, could retaliate against the U.S. move in a manner that could escalate tension in the volatile, oil-rich Middle East region.

"As supply and demand rebalances, the market will be more sensitive to geopolitical risks," said analyst Phil Flynn at Price Futures.

At 9:00 AM ET, NYMEX November WTI crude oil futures climbed $1.09 to $51.69 bbl, off a $51.72 two-week high. December Brent crude on the ICE platform was $1.18 higher at $57.43 bbl, off a $57.57 two-week high, trading at a $5.74 premium to WTI. NYMEX November ULSD futures climbed 3.93cts to $1.8048 gallon, near a one-week high of $1.8051, and November RBOB futures surged 4.31cts to $1.6234 gallon, near a $1.6265 one-week high.

George Orwel can be reached george.orwel@dtn.com