Oil prices rise to highest levels of 2021

Oil prices rise to highest levels of 2021

Oil prices rose to the highest levels of the year, with expectations of growing supply tightness overshadowing worries about weaker economic growth and rising U.S. inventories.

By Sept. 15, the futures traded 1.3% higher at $89.69 a barrel, while the contract rose 1.3% to $93.06.

Both contracts are on course for healthy gains this week, on the back of Saudi Arabia and Russia announcing that they will extend voluntary output cuts until the end of the year.

The decision of these two major producers to limit supply will result in a market deficit through the fourth quarter, the International Energy Agency said in its monthly report published Wednesday.

The prospect of tighter markets is likely to underpin prices in the coming months, the Organization of Petroleum Exporting Countries said in its monthly reports earlier this week.

This positive tone has helped traders avoid concerns about higher interest rates in the U.S. possibly impacting economic activity in the world's largest energy consumer.

Data released earlier Thursday showed that the United States rose more than anticipated in August, while unexpectedly edged higher, suggesting a mixed picture of sticky inflation and resilient consumer activity heading into next week's key interest rate decision.

The U.S. unexpectedly grew from September 8 to September 8, with a rise in gasoline and distillate inventories indicating that fuel demand was beginning to wind down with the end of the summer season.

The increase in interest rates by 25 basis points a record level earlier Thursday, the tenth straight rate increase, as policymakers sought to address elevated inflation in the eurozone.

The week ends with more economic cues from the world's biggest oil importer, with Chinese and readings due on Friday.

While some economic readings, especially trade and inflation, showed marginal improvement in the Chinese economy through August, overall sentiment about the nation remained largely negative, as it grapples with a slowing economic recovery.

This has also caused markets to question whether China will drive global crude demand to record levels this year.