Oil extends gains to two-week high on supply shortage concerns

Oil prices rose in European trade for the second session, hitting two-week highs and on track for the second weekly profit in a row on concerns about global supply shortages.

The concerns grew after the sharp decrease in US crude stocks last week, while US output tumbled as well, with Kurdish supplies halted through Turkish ports.

Prices are also boosted by signs of improving demand in China after reopening the economy.

Global Prices

US crude rose 0.9% to $74.96 a barrel, the highest since March 13, while Brent added 0.75% to $79.04 a barrel, the highest since March 14.

US crude rallied 2.1% on Thursday while Brent climbed 1.3% as the dollar lost ground. 

Oil prices are 7% higher so far this week on track for the second weekly profit in a row away from recent 15-month lows.

US Stocks

The Energy Information Administration announced a drawdown of 7.5 million barrels in the week ending March 24, while analysts expected a buildup of 1.8 million barrels.

It's the largest inventory drawdown in 2023 in a sign of improving US demand on fuel.

US Output

The EIA also announced a drop in US crude production by 100 thousand bpd last week to a total of 12.2 million barrels.

Kurdish Supplies

Turkey stopped the Kurdistan Region from pumping crude through its oil pipeline after a court order than required the approval of the Iraqi government to ship the oil.

Such legal conflicts in Iraq between the federal government and Kurdistan led to a cut of 450 thousand bpd in crude exports.

Barkley's expects an increase of $3 a barrel in crude stocks from its $92 projections for Brent in 2023 with a long-term disruption in Kurdish exports.

Chinese Demand

Recent government data showed official outlook for Chinese crude imports are expected to grow 6.2% this year to 540 million tones.