© Reuters. FILE PHOTO: Oil rigs are seen at Vaca Muerta shale oil and gas drilling, in the Patagonian province of Neuquen, Argentina January 21, 2019. REUTERS/Agustin Marcarian/File Photo

By Shariq Khan

BENGALURU (Reuters) – Oil prices hit a 10-month high on Friday and posted a third weekly gain as supply tightness spearheaded by Saudi Arabian production cuts combined with optimism around Chinese demand to lift crude.

futures rose 23 cents, or 0.3%, to settle at $93.93 a barrel, while U.S. West Texas Intermediate futures was up 61 cents, or 0.7%, to close at $90.77 a barrel. Both contracts traded at 10-month highs on Tuesday for the fifth consecutive session, and gained about 4% on a weekly basis.

Oil prices are also on track for their biggest quarterly increase since Russia’s invasion of Ukraine in the first quarter of 2022.

Supply concerns continue to be a driving force for prices since Saudi Arabia and Russia this month announced an extension of their combined supply cuts of 1.3 million barrels per day to the end of this year, said Fiona Cincotta, an analyst at City Index.

Better-than-expected industrial output and retail sales data in China have also boosted oil prices this week, with the country’s economic conditions considered crucial to oil demand for the rest of this year, Cincotta added.

Data on Friday showed Chinese oil refinery processing rose by nearly 20% from a year earlier as processors kept run rates high to capitalise on high global demand for oil products.

Expectations of moderating U.S. oil output have also boosted prices in recent weeks, Third Bridge analyst Peter McNally said.

“Supply growth from the U.S. appears to be limited as producers there have taken drilling activity down nearly 20% from last year’s peak,” McNally noted.

The U.S. oil rig count rose by two this week to 515, the most since April, data from oilfield services firm Baker Hughes showed on Friday. Compared to a year ago, however, the oil rig count is down by 84 units, the data showed.