Oil prices up on tightening supplies, potential Chinese stimulus

Oil prices saw an increase on Friday in line with the tightening of supplies and in hopes that China will enhance incentives for its economic growth, Reuters reported.

Brent crude rose by 71 cents at $80.35 a barrel while US West Texas Intermediate (WTI) crude witnessed an increase of 69 cents to $76.34 a barrel — up by more than $1 earlier in the session.

"The supply deficit that had been looming in the second half of the year is now backed up by hard figures," Commerzbank analysts said. 

Data revealed that China and India's crude oil imports from Russia had hit an all-time high in June.

In line with the narrowing discounts and payment problems, India is expected to face a weaker buying interest. Meanwhile, Russia joined Saudi Arabia in cutting output for August earlier this month. 

"Demand from China and India could therefore shift more towards other suppliers, which would push up oil prices," the analysts said.

Meanwhile, crude inventories in the US fell following an increase in crude imports and higher refinery utilisation, the Energy Information Administration (EIA) said on Wednesday.

"That tightness in supply is already showing up in inventories," analysts from ANZ Bank said.

Moreover, the stimulus measures to improve the economy of China have been welcomed by investors. Chinese authorities revealed the plans on how to increase the sales of automobiles and electronics on Friday. 

The world's second-biggest oil consumer hinted at the likelihood of the 5% annual growth target of the government will be missed. 

Chinese authorities also revealed plans on increasing automobile and electronics sales on Friday. 

"The announcement remains short on detail but notions of China buying more cars gives rise in hope for oil investor bulls," PVM analyst John Evans said.