Brent oil resumes climb, nears $70 as supply tightens

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NEW YORK (Reuters) – Brent oil prices rose on Thursday, resuming their climb toward $70 per barrel as expectations of tight global supply outweighed pressure from rising U.S. production and less robust global demand indicators.

FILE PHOTO: An offshore oil rig is seen in the Caspian Sea near Baku, Azerbaijan, October 5, 2017. REUTERS/Grigory Dukor/File Photo

International benchmark Brent futures rose 34 cents to $69.65 by 11:28 a.m. EDT (1528 GMT). Brent touched $69.96 on Wednesday, the highest since Nov. 12, when it last traded above $70.

U.S. West Texas Intermediate (WTI) crude rose 13 cents a barrel to trade at $62.59. The contract hit $62.99 on Wednesday, also its highest since November.

Brent has gained nearly 30 percent this year, while WTI has risen nearly 40 percent, underpinned by U.S. sanctions on Iranian and Venezuelan crude, OPEC production cuts and rising global demand.

“There is a clear bias to the upside with the supply restrictions,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“And there’s a much better than expected demand picture after the recent China and U.S. PMI numbers, along with a potential kicker from any U.S.-China trade agreement,” McCarthy said.

The Caixin/Markit services purchasing managers’ index (PMI) rose to 54.4, the highest since January 2018 and up from February’s 51.1, a private business survey of China’s service sector showed on Wednesday.

Trade talks between the United States and China made good headway last week in Beijing and the two sides aim to bridge differences during further talks, White House economic adviser Larry Kudlow said on Wednesday.

The refinery maintenance season is also drawing to a close and that will provide further demand for crude, said Virendra Chauhan, oil analyst at Energy Aspects in Singapore.

“The physical market is very strong and we are now starting to trade post-turnaround barrels, which should mean physical markets strengthen and flat prices should follow,” Chauhan said.

But the gains were moderated during the session, with U.S. crude briefly turning negative.

“We keep having these headwinds,” said John Kilduff, a partner at Again Capital Management in New York. “Save for that one China PMI number, the economic data continues to be not great.” Bearish economic indicators globally, including lower German factory orders, have limited the upside for the market, he said.

German industrial orders fell by the sharpest rate in more than two years in February, according to data released Thursday. Orders were hit by a slump in foreign demand, compounding worries that Europe’s largest economy had a weak start to the year.

Crude oil inventories in the United States rose by 7.2 million barrels last week, whereas analysts had forecast a decrease.

U.S. crude production climbed by 100,000 barrels per day to a record 12.2 million bpd, government data showed.

Additional reporting by Dmitry Zhdannikov and Aaron Sheldrick Editing by Dale Hudson, David Holmes and David Gregorio