Brent crude trading near seven-week high

> Oil market buoyed by stronger Chinese refinery demand, modest output increases by Opec

LONDON: Brent crude oil rose towards its highest price since early July yesterday, thanks to evidence of stillmodest increases in output from Opec and stronger Chinese refinery demand.

Brent futures gained 29 cents to US$76.50 (RM314) a barrel by 1409 GMT, having touched a session peak of US$76.97, the highest since July 11. US crude futures fell by 13 cents to US$68.74 (RM282) a barrel.

The monitoring committee of the Organisation of the Petroleum Exporting Countries found that oil producers participating in a supply-reduction agreement, which includes non-Opec member Russia, cut output in July by 9% more than called for.

Investors are now more confident that supply is likely to fall short of demand in the coming months, as reflected by a narrowing in the discount, or spread, between the October and November Brent futures contracts to around 26 cents a barrel, half of what it was a month ago.

“We were of the view earlier that we are expecting prices to edge a bit lower over the rest of this year, but I struggle to see that. I see the market remaining well supported, with potential shocks to the upside, depending on what we get from Iran,” ING commodities strategist Warren Patterson said.

“Looking at the spreads, it is starting to appear that the market (balance) is somewhat tightening.”

When the price of a prompt contract is at a premium to the price of a longerdated contract this indicates a belief that oil demand will outpace supply.

The findings of the Opec monitoring committee for last month compare with a compliance level of 120% for June and 147% for May, meaning participants have been steadily increasing production, but at a more modest pace.

Opec and its partners agreed in late 2016 to cut output from 2017 by around 1.8 million bpd versus October 2016 levels.

“Venezuela is no doubt still chiefly responsible for the over-compliance as production there has been falling for months because of the economic crisis,” Commerzbank analysts wrote. – Reuters