Oil rises as the storm approaches the production center in the Gulf of Mexico

Oil prices rose on Friday, expecting a significant rise for the week due to concerns about short-term supply disruptions as energy companies began to stop production in the Gulf of Mexico ahead of a forecast of a potential hurricane over the weekend.

 

Futures for WTI crude oil rose 16 cents, or 0.2%, to $67.58 a barrel at 01.01 GMT, after recovering a 1.4% drop on Thursday. WTI is aiming for a weekly gain of more than 8%, which will be the strongest growth since the beginning of February.

 

Brent crude futures also rose 16 cents, or 0.2%, to $71.23 a barrel after falling 1.6% on Thursday.

 

The price of Brent crude will rise more than 9% this week, the biggest weekly jump since June 2020, largely due to relief that China has contained the delta variant flare-up.

 

On Thursday, the companies began moving workers from oil production platforms in the Gulf of Mexico, and BHP and BP said they had begun to stop production on offshore platforms as a storm brewed in the Caribbean Sea that is forecast to pass through the Persian Gulf over the weekend.

 

Offshore wells in the Gulf of Mexico account for 17% of U.S. crude oil production and 5% of dry natural gas production. More than 45% of all U.S. refining capacity is located on the Gulf Coast.

 

The prospect of supply disruptions in the Persian Gulf helped the market recover from losses on Thursday, which were partly caused by the resumption of production on the Mexican oil platform after a deadly fire.

 

"The market may have more serious concerns about the hurricane in the Caribbean. It is expected to become a powerful hurricane and potentially cause damage to the Gulf of Mexico and Texas early next week," ANZ Research said in a statement.

 

Analysts also expect the dollar movement to be an important factor on Friday after the long-awaited speech by US Federal Reserve Chairman Jerome Powell. Markets expect it to make some recommendations on plans to curtail bond purchases in the fourth quarter.

 

"If we see an earlier decline in prices, we expect the US dollar to rise and this will put pressure on oil and other commodities," said Commonwealth Bank commodities analyst Vivek Dhar.