Oil set for largest weekly gain since October

Oil prices rose early on Friday and were on course to post their biggest weekly gain since October last year as Gulf of Mexico oil operators started evacuating personnel and shutting in production ahead of a hurricane expected to pass through the Gulf in the weekend. As of the start of trading today, WTI was up 1.66 percent at $68.54 and Brent Crude traded at $72.13, up 1.49 percent. Despite Thursday’s retreat, oil prices were set on Friday for a large weekly gain of around 9 per cent, driven by a more optimistic demand outlook with China reporting earlier this week zero symptomatic COVID cases for the first time in weeks.

A weaker U.S. dollar earlier this week also supported oil prices, which had jumped 5% at close on Monday, rebounding from the longest losing streak since 2019 of seven consecutive settlements in the red, as investor risk appetite increased. On Tuesday, the prompt Brent Crude price bounced back to above $70 a barrel as a major outage at a Mexican platform lent support to oil prices. A fire on Sunday killed five workers on an offshore platform operated by Mexico’s state oil firm Pemex and injured another six. The platform and 125 wells went offline, which reduced Mexico’s crude oil production by 421, 000 barrel per day  (bpd), or around a quarter of the country’s output. Crude and gasoline inventory draws, as estimated by the EIA, supported oil prices on Wednesday, while a stronger U.S. dollar weighed on the oil complex on Thursday.

Oil rebounded early on Friday as major oil firms in the Gulf of Mexico started preparing of hurricane Ida, including by evacuating offshore platform workers and shutting in production. The oil market will be looking at the Jackson Hole summit later on Friday for signs of the Fed’s intentions about the tapering of the asset purchase program, but the key event for oil prices would likely be next week’s OPEC+ meeting on September 1. “OPEC+ will take some comfort in the fact that we have seen a fairly swift recovery in oil prices from the lows of last week,” ING strategists Warren Patterson and Wenyu Yao said on Friday, adding they don’t expect any change to the production policy and continue to believe that OPEC+ will ease supply cuts by 400,000 bpd in September.