Strong Chinese Crude Imports Boost Oil Prices

Oil prices jumped Friday on a mix of factors, including bullish Chinese data and geopolitical risks from oil-rich regions in the Middle East.

Brent crude, the global benchmark, was up 1.87%, at $57.30 a barrel on London's Intercontinental Exchange.

On the New York Mercantile Exchange, West Texas Intermediate futures gained 1.64% to $51.43 a barrel.

Chinese crude imports rose by roughly 1 million barrels a day in September, on the month, to 9 million barrels a day, according to government data released Friday. The news alleviated investor concern that demand in the world's largest crude importer might be waning amid faltering economic growth.

The September "bounce back" was the highest import volume in China since May, according to analysts at ING Groep.

Prices were also supported Friday by concerns that political developments in Iran and Iraq could reduce the global oil supply.

President Donald Trump is expected to reveal in a speech Friday afternoon whether he will certify a 2015 international agreement with Iran to curb the Islamic Republic's nuclear program in exchange for economic sanctions relief. The lifting of sanctions at the start of 2016 has allowed Iran to significantly increase its production to around 3.8 million barrels a day. But if Mr. Trump moves to disavow the deal or impose fresh sanctions on Iran it could undermine the country's export capacity.

At the same time, tensions are building between Iraq's central government in Baghdad and the leaders of the semi-autonomous Kurdistan region in the north, which late in September held an independence referendum. Kurdistan exports over 500,000 barrels of crude a day.

"Until recently, market participants have underestimated geopolitical risk because the discussion was all about oversupply," said Giovanni Staunovo, commodity analyst at UBS Wealth Management.

Mr. Staunovo said the market was now more attuned to the fact that the Iran and Iraq situations could result in less oil on the market, in turn boosting prices.

The spike in prices Friday followed two closely watched, somewhat conflicting oil market reports this week, from the Organization of the Petroleum Exporting Countries and the International Energy Agency respectively.

OPEC said its crude oil production had increased by nearly 90,000 barrels a day in September, complicating the cartel's efforts to limit output and curb the global supply glut.

However, the IEA praised OPEC's efforts to rein in output and said its production had increased by only 10,000 barrels a day, adding that global supply had risen in September due to increased U.S. production.

OPEC and some producers outside the cartel, including Russia, first agreed nearly a year ago to cap production at around 1.8 million barrels a day lower than peak October 2016 levels. The agreement's impact wasn't immediate, but global oil prices have risen steadily over the past few months, supported by strong demand.

Saudi Arabia, OPEC's largest member, and Russia have indicated in recent weeks that they are open to extending the deal through 2018 after it expires in March.

There is "little doubt that the leading producers have recommitted to do whatever it takes to underpin the market and to support the long process of rebalancing," the IEA said in its report.

Data released Thursday by the U.S. Energy Information Administration showed a 2.7 million barrel drop in crude oil stocks for the week ended Oct. 6. Analysts and traders surveyed by The Wall Street Journal had projected a 1.7-million-barrel decrease.

Among refined products, Nymex reformulated gasoline blendstock--the benchmark gasoline contract--was up 1.11%, at $1.61 a gallon. ICE gasoil, a benchmark for diesel fuel, changed hands at $534.25 a metric ton, up 2.44% from the previous settlement.

Write to Christopher Alessi at christopher.alessi@wsj.com

Oil prices jumped Friday on a mix of factors, including bullish Chinese data and geopolitical risks from oil-rich regions in the Middle East.

Light, sweet crude for November delivery rose 85 cents, or 1.7%, to $51.45 a barrel on the New York Mercantile Exchange, closing at a two-week high. Brent, the global benchmark, rose 92 cents, or 1.6%, to $57.17 a barrel.

The September "bounce back" was the highest import volume in China since May, according to analysts at ING Groep.

On Friday, President Donald Trump said he wouldn't recertify a 2015 international agreement with Iran to curb its nuclear program in exchange for economic-sanctions relief. The lifting of sanctions at the start of 2016 has allowed Iran to significantly increase its production to around 3.8 million barrels a day. But disavowal of the deal or the imposition of fresh sanctions on Iran could undermine the country's export capacity.

At the same time, tensions are building between Iraq's central government in Baghdad and the leaders of the semiautonomous Kurdistan region in the north, which late in September held an independence referendum. Kurdistan exports over 500,000 barrels of crude a day.

"Until recently, market participants have underestimated geopolitical risk because the discussion was all about oversupply," said Giovanni Staunovo, commodity analyst at UBS Wealth Management.

Mr. Staunovo said the market was now more attuned to the fact that the Iran and Iraq situations could result in less oil on the market, in turn boosting prices.

Traders also weighed news reports that Saudi Arabia's state-owned oil company is considering options other than its plan to list shares in New York or London in 2018.

Some market participants have cited the impending initial public offering of Saudi Aramco as a reason for the major oil producer to prioritize supply cuts and support crude prices. If the IPO is derailed, it could be a bearish catalyst for oil prices, analysts said. However, the market reaction to the news was muted on Friday.

"I just don't think that's as much of a market factor as some other people think," said Kyle Cooper, a consultant at ION Energy Group. "There's just a tremendous amount of money flow and sentiment driving this market."

The news threatens to muddle an already conflicted picture of how successful Saudi Arabia and the Organization of the Petroleum Exporting Countries have been at reducing a global glut of crude oil.

This week, OPEC said its crude oil production had increased by nearly 90,000 barrels a day in September, complicating the cartel's efforts to limit output and curb the global supply glut.

However, the IEA praised OPEC's efforts to rein in output and said its production had increased by only 10,000 barrels a day, adding that global supply had risen in September because of increased U.S. production.

Saudi Arabia, OPEC's largest member, and Russia have indicated in recent weeks that they are open to extending the deal through 2018 after it expires in March.

There is "little doubt that the leading producers have recommitted to do whatever it takes to underpin the market and to support the long process of rebalancing," the IEA said in its report.

Gasoline prices rose 2.5%, to $1.6222 a gallon, and diesel prices rose 1.8%, to $1.7970 a gallon.

Write to Christopher Alessi at christopher.alessi@wsj.com and Stephanie Yang at stephanie.yang@wsj.com

(END) Dow Jones Newswires

October 13, 2017 17:15 ET (21:15 GMT)