Crude Oil Prices Nudge Up on Supply Worries

Oil prices rose to around $112.75 a barrel on Thursday, buoyed by supply disruptions in the Gulf of Mexico and lower Brent output along with disappointing data from China, which raised hopes in some quarters of further monetary stimulus there.

Brent crude for September delivery was up 61 cents at $112.75 a barrel by 0953 GMT. U.S. crude was up 47 cents at $93.82 a barrel.

The oil price remains underpinned by supply restrictions in the North Sea due to maintenance and port closures in the Gulf of Mexico as the hurricane season gets underway.

"The general mood is bullish - any dip is still being used as a buying opportunity," said Carsten Fritsch, an energy analyst at Commerzbank in Frankfurt. "Given the supply risk, with falling North Sea output and the closure of three oil ports in Mexico, all this should lend support to prices."

North Sea oil output will plunge 17 percent in September due to maintenance at the Buzzard oilfield and natural decline, adding to signs of a shortage that may artificially lift prices of Brent.

As a result, Harry Tchilinguirian and Gareth Lewis-Davies, commodities strategists at BNP Paribas, thought Brent's premium to U.S. crude could widen beyond the $18-$19 seen on Thursday.

"At this juncture, expectations surrounding the impact of lower North Sea production in September are likely mostly embedded in the front month Brent price. Yet, we cannot exclude the possibility that Brent's premium may rise further," they said in a note.

Meanwhile, Tropical Storm Ernesto has moved into the southern Bay of Campeche in the Gulf of Mexico, where the country's main oil operations are located. Mexico closed its three major oil export ports on the Gulf.

"This Tropical Storm is a reminder that the most active time of the hurricane season is just ahead of us so this could also add a risk premium to the oil price," said Fritsch.

"We should see another dip in U.S. crude oil inventories in the next report, due to lower imports," he added.

U.S. crude oil stockpiles fell more than expected last week despite rising imports, data from the Energy Information Administration showed on Wednesday. Analysts said the shutdown of an Enbridge pipeline reduced supply.

Adding to general feelings of tighter supply, Saudi Arabia said that it had cut its crude output in July to 9.8 million barrels per day (bpd), down from 10.1 million in June.

Saudi has been pumping at a higher rate since spring to compensate for the loss of Iranian crude due to a Western embargo.

MONETARY STIMULUS

Traders and investors are also pinning their hopes on further monetary easing following disappointing Chinese data. This showed annual growth in Chinese factory output slowing to its weakest in more than three years in July, and retail sales missing market forecasts.

In addition, annual consumer inflation has fallen to a 30-month low in July, suggesting that the central bank has ample scope to ease policy.

But some analysts were sceptical, pointing out that demand was key. "Easing will only help on the margins - at the end of the day you still need people to buy stuff, and China can't expect its export markets in Europe to grow any time soon given what is happening there," said Michael Hewson, a markets analyst at CMC Markets.

China's refinery throughput inched up 1.1 percent in July, reversing a run of declines for three straight months, but this was the second-lowest level this year as demand stayed tepid in the world's second-largest oil consumer. (Additional reporting by Florence Tan in Singapore; Editing by Alison Birrane)