Investing.com -- Oil prices climbed to the year’s highest levels as expectations of growing supply tightness overshadowed concerns over weaker economic growth and rising U.S. inventories.
By 09:15 ET (13.15 GMT), the U.S. crude futures traded 1.3% higher at $89.69 a barrel, while the Brent contract climbed 1.3% to $93.06.
Both contracts are on course for healthy gains this week, continuing the previous week’s surge, on the back of Saudi Arabia and Russia announcing that they will extend voluntary output cuts until the end of the year.
Tight supply to underpin prices
The decision by 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 also noted in its monthly reports earlier this week.
OPEC also retained its forecasts for robust growth in global oil demand this year and next, saying "pre-COVID-19 levels of total global oil demand will be surpassed in 2023."
Tighter monetary policy causing concerns
This positive tone has helped traders shut out concerns about higher interest rates in the U.S. potentially hitting economic activity in the world’s largest energy consumer.
Data released earlier Thursday showed that U.S. producer prices rose by more than anticipated in August, while retail sales unexpectedly edged higher, suggesting a mixed picture of sticky inflation and resilient consumer activity heading into next week's key Federal Reserve interest rate decision.
U.S. inventories unexpectedly grew in the week to September 8, with a rise in gasoline and distillate inventories suggesting that fuel demand was beginning to wind down with the end of the summer season.
Additionally, the European Central Bank hiked interest rates by 25 basis points to a record high earlier Thursday, the tenth straight rate increase, as policymakers looked to address elevated inflation in the eurozone.
"Inflation continues to decline but is still expected to remain too high for too long," the ECB said in a statement.
Chinese economic data ends the week
The week ends with more economic cues from the world’s largest oil importer, with Chinese industrial production and retail sales readings due on Friday.
While some economic readings, particularly trade and inflation, showed marginal improvements in the Chinese economy through August, overall sentiment towards the country remained largely negative, as it struggles with a slowing economic recovery.
This has also kept markets doubtful of whether China will drive global crude demand to record highs this year.
(Ambar Warrick contributed to this item.)