Oil headed for a second consecutive weekly gain following a draw in U.S. stockpiles.

Benchmark Brent, which held above US$85 a barrel, is on course to advance more than three per cent this week, while WTI traded near $81. U.S. crude stockpiles fell by 2.2 million barrels, while inventories of gasoline and diesel-type fuel also declined.

“Overall, the EIA data suggests a tightening US oil market,” said Vivek Dhar, an analyst at Commonwealth Bank of Australia, referring to the Energy Information Administration. Still, “over the near term, we think China’s oil demand growth disappointing market expectations is the key downside risk to consider,” he said.

Oil has risen from early June, when the Saudi energy minister reiterated that OPEC+’s recent deal retains the option to pause or reverse production changes. Banks including Goldman Sachs Group Inc., ING Groep NV and Citigroup Inc. have flagged market deficits. A key trader metric for Brent futures is flashing signs of strength, with the prompt spread near the widest backwardation since April.

Citi sees a global oil and products deficit of about 200,000 barrels a day in the third quarter, with a bigger shortfall for crude only.

“There remain salient geopolitical risks, with renewed confrontations between Israel and Hezbollah on the Israel-Lebanon border and new attacks by the Houthis in the Red Sea, and potential weather-related disruptions,” Citi said in a report.

Prices:

• Brent for August was 0.0700% lower at $85.65 a barrel at 11:17 a.m. in London
• WTI for August delivery was steady at $81.26 a barrel