Oil is heading for a 2% weekly gain due to holiday demand in China and tight supplies in the United States

An Aramco employee walks near an oil tank at the Ras Tanura oil refinery and Saudi Aramco oil terminal in Saudi Arabia on May 21, 2018. Photograph: Ahmed Jadallah/Reuters. Obtaining licensing rights

September 29 (Reuters) – Oil prices are on track for a weekly gain of about 2% after regaining their gains on Friday, as strong demand from China due to the holidays and continued tightening U.S. fundamentals outweighed expectations of possible increases in supplies from Saudi Arabia.

Brent crude futures for November, which expire on Friday, rose five cents to $95.43 a barrel. Brent crude futures for December rose 13 cents to trade at $93.23 a barrel by 0335 GMT.

US West Texas Intermediate crude rose 16 cents to $91.87 a barrel.

The market fell about 1 percent in the previous session, with traders taking profits after prices rose to their highest levels in ten months, and some worried that high interest rates might affect demand for oil.

Improved macroeconomic data from China, the world’s largest oil importer, along with strong demand for fuel as the country begins the week-long Golden Week holiday on Friday, supported prices.

“Increasing international travel over the Golden Week holiday is boosting Chinese oil demand,” ANZ analysts said in a note to clients.

Domestic travel is also expected to boost demand, with data from flight app Umetrip showing the average number of daily flights booked is a fifth higher compared to Golden Week in 2019, before coronavirus.

Factory activity in China is likely to stabilize in September, a Reuters poll showed, adding to a series of indicators that the world’s second-largest economy is beginning to stabilize, which could further boost demand. Official data is scheduled to be released on Saturday.

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Data on Thursday showed that the US economy maintained a fairly strong pace of growth in the second quarter and activity appeared to accelerate in the quarter, indicating that strong demand for fuel may continue.

The backdrop of tight supplies in the US provided further support to prices, as storage in Cushing, Oklahoma, the delivery point for US crude futures, reached its lowest levels since July 2022.

“U.S. oil production is also expected to slow due to a decline in the number of drilling rigs. Low supply and record global demand of 103 million barrels per day could push the market into a deficit of more than 2 million barrels per day in the fourth quarter.”

Traders are awaiting the meeting of the Organization of the Petroleum Exporting Countries and its allies, within the framework of the so-called OPEC+, next week, to obtain indications about whether Saudi Arabia may want to increase supplies after a jump of about 30% in prices this quarter.

“There is likely a reluctance among participants to rally too high at the moment with the market clearly in the overbought zone,” ING Bank analysts said in a note to clients.

“There is also potential concern that OPEC+, and specifically Saudi Arabia, could start easing cuts earlier than planned if prices rise too much,” they added.

The OPEC+ Ministerial Committee meeting is scheduled to be held on October 4.

“Next week’s OPEC meeting will be a major market update with the likelihood of Aramco’s voluntary supply cuts becoming more likely,” National Australia Bank analysts said in a note to clients.

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(Reporting by Katya Golubkova) Editing by Jamie Freed and Sonali Paul

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