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Oil posts biggest weekly gains in over a year ahead of Hurricane Ida

CommoditiesAug 27, 2021 03:25PM ET
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© Reuters. FILE PHOTO: A sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, U.S. November 22, 2019. REUTERS/Angus Mordant

By Scott DiSavino

NEW YORK (Reuters) -Oil prices rose 2% on Friday, posting their biggest weekly gains in over a year, as energy firms began shutting U.S. production in the Gulf of Mexico ahead of a major hurricane expected to hit early next week.

Brent futures rose $1.63, or 2.3%, to settle at $72.70 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.32, or 2.0%, to settle at $68.74.

That was the highest close for Brent since Aug. 2 and for WTI since Aug. 12.

For the week, Brent gained over 11% and WTI rose more than 10%, which was the biggest weekly percentage gains for both since June 2020.

"Energy traders are pushing crude prices higher in anticipation of disruptions in output in the Gulf of Mexico and on growing expectations OPEC+ might resist raising output given the recent Delta variant impact over crude demand," Edward Moya, senior market analyst at OANDA, said.

Oil producers on Friday have shut-in 59% of Gulf of Mexico crude production as the ninth-named storm of the season barreled towards the key U.S. offshore oilfields, according to the Bureau of Safety and Environmental Enforcement (BSEE).

U.S. oil and gas companies raced to complete evacuations from offshore Gulf of Mexico platforms before Hurricane Ida slams into Louisiana as a major storm early next week.

Gulf of Mexico offshore wells account for 17% of U.S. crude production, while over 45% of total U.S. refining capacity lies along the Gulf Coast.

"Historically speaking, crude oil rallies as hurricanes approach, despite the fact that refineries do not need crude oil when they are shut down during a storm," said Bob Yawger, director of energy futures at Mizuho in New York.

Offshore crude oil prices and Gulf Coast crude grades were strengthening due to the hurricane, traders said. Mars crude - considered the benchmark sour grade in the Gulf Coast - firmed to trade at about $1.45 below benchmark futures, rising by about $1 since Tuesday. [CRU/C]

U.S. oil rigs rose five to 410 this week, their highest since April 2020, energy services firm Baker Hughes Co said. In August, drillers added 25 oil rigs, the most in a month since January, putting the oil rig count up for 12 months in a row for the first time since July 2017.[RIG/U]

Oil prices were also supported by a decline in the U.S. dollar to a one-week low versus a basket of other currencies following comments by U.S. Federal Reserve Chair Jerome Powell. [USD/]

A weaker U.S. dollar makes oil less expensive for holders of other currencies.

Powell, in a speech that affirmed an ongoing U.S. economic recovery and explained why there is no rush to tighten monetary policy, gave a detailed account on Friday of why he regards a spike in inflation as temporary and offered no signal on when the central bank plans to cut its asset purchases beyond saying it could be "this year."

Looking ahead, the Organization of the Petroleum Exporting Countries and its allies, including Russia, a group known as OPEC+, will meet on Sept. 1 to discuss its plan from July to raise output by 400,000 barrels per day every month for the next several months.

Oil posts biggest weekly gains in over a year ahead of Hurricane Ida
 

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Comments (9)
JonMichael Patrick
JonMichael Patrick Aug 27, 2021 4:05PM ET
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and gulf based companies will lose money bc they are forced to shut down lmao... every year same thing happens!!! everyone else will benefit but not xom mro and apa etc. loaded on puts. wait til they lower their expected earnings bc the storm took away 5-7 days of the 90 day quarterbuy the rumor sell the news
Shane Weddle
Shane Weddle Aug 27, 2021 4:05PM ET
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MRO has no exposure to offshore oil. HQ Is in houston, but ther has bothing to do with the E&P activities.
Robert Cutler
Robert Cutler Aug 27, 2021 10:43AM ET
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Notice the relationship between US crude oil price and Putin's age
JonMichael Patrick
JonMichael Patrick Aug 27, 2021 7:55AM ET
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exactly it isn't hitting 25 countries... this is an excuse to jack up gas prices, but has no affect on oil supply and demand globally
VC India
VC India Aug 27, 2021 3:50AM ET
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it is not surprise storm, it is a common thing every year its comes, but the way the NG prices fly its not fair for the general common peoples to bear the high prices.  Weather analyst already knows in advance before a month that the storm will come.
perplexed76 .
perplexed76 . Aug 27, 2021 2:16AM ET
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every year storms come, every year oil gamblers die
PAC MAN
PAC MAN Aug 27, 2021 1:21AM ET
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gom doesnt even comprise 5 % of gas and still it managed to gave enormous pump. highly bullish market atm
Rustam Garaev
235666 Aug 27, 2021 12:31AM ET
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solar companies will shine
Mohd Khalid
Mohd Khalid Aug 27, 2021 12:31AM ET
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Hello
JonMichael Patrick
JonMichael Patrick Aug 26, 2021 11:29PM ET
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oh I'm sure they will use it as an excuse to raise gas through the roof due to refineries offline bs.. but oil? this storm hitting 25 countries? lol
Seema NIRMAL
Seema NIRMAL Aug 26, 2021 10:08PM ET
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when the price trend reversal of gas and crude
 
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