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Oil jumps on weather concerns in Gulf of Mexico

CommoditiesMay 21, 2021 06:00PM ET
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© Reuters. FILE PHOTO: Pumpjacks are seen during sunset at the Daqing oil field in Heilongjiang province, China August 22, 2019. Picture taken August 22, 2019. REUTERS/Stringer

By Jessica Resnick-Ault

NEW YORK (Reuters) -Oil prices jumped 2% on Friday after three days of losses, driven higher as a storm formed in the Gulf of Mexico, but were on track for a weekly fall as investors braced for the return of Iranian crude supplies after officials said Iran and world powers made progress a nuclear deal.

Brent crude futures settled up $1.33, or 2%, to $66.44 a barrel, while U.S. West Texas Intermediate was at $63.54 a barrel, up $1.64, or 2.65%.

A weather system forming over the western Gulf of Mexico has a 40% chance of becoming a cyclone in the next 48 hours, the U.S. National Hurricane Center (NHC) said on Friday.

"This early storm prompted traders to buy crude ahead of the weekend in anticipation of potential production shut-ins," said Phil Flynn, senior analyst at Price Futures Group in Chicago.

The gains were limited by the expectation that Iran could add a million or more barrels per day of oil production later this summer.

The two contracts fell almost 3% on the week, after Iran's president, Hassan Rouhani, said the United States was ready to lift sanctions on his country's oil, banking and shipping sectors.

U.S. energy firms added oil and natural gas rigs for a fourth week in a row as higher oil prices prompt some drillers to return to the wellpad.

The oil and gas rig count, an early indicator of future output, rose two to 455 in the week to May 21, its highest since April 2020, energy services firm Baker Hughes Co said in its closely followed report on Friday. [RIG/U]

Iran and world powers have been in talks since April on reviving the 2015 deal and the European Union official leading the discussions said on Wednesday he was confident a deal would be reached.

Still, investors remain upbeat about fuel demand recovery this summer as vaccination programs in Europe and the United States would allow more people to travel, although rising cases across parts of Asia are raising concerns.

Option bets on oil prices rising above $100 for the December 2021 Brent contract have jumped after last week's surprisingly strong U.S. inflation data, with open interest on calls nearly tripling in May, JPMorgan (NYSE:JPM) analysts said. The bank's forecast is for Brent to end 2021 at $74.

To reach $100, demand would need to average above 102.6 million bpd in the third quarter and grow to 103.6 million bpd in the fourth quarter, JPMorgan said, in the absence of any additional OPEC+ supply response. It expects Iranian crude and condensate production to rise to 3.2 million barrels per day in December, from around 2.8 million bpd in the first quarter.

Barclays (LON:BARC) expects Brent and WTI oil prices to average $66 a barrel and $62 a barrel, respectively, this year. It cut demand estimates for the Emerging Markets Asia (ex-China) region, flagging the risk of further downside if the recent surge in infections persisted.

"Extended mobility restrictions in the region might slow the demand recovery somewhat, but seem unlikely to stall it for a sustained period, given largely positive results of vaccination programs worldwide," it said.

Money managers cut their net long U.S. crude futures and options positions in the week to May 18, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday. [AQN047BIE]

Oil jumps on weather concerns in Gulf of Mexico
 

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Comments (8)
Alan Rice
Alan Rice May 23, 2021 2:39PM ET
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Road Trip !! (If only there was still a healthy destination.)
perplexed76 .
perplexed76 . May 21, 2021 11:39PM ET
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omg storm №127484 is coming. i hope oil gamblers will have the same end like their crypto brothers.
Chris Sundo
Chris Sundo May 21, 2021 11:07PM ET
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OIL UP : I D K who is pranking about oil being up coz ERY, the Oil bear stock is up every time they say 'oil is up'  .. what a joke .. today ERY is down 0.06 cents and ERY is a 2x leverage stock. -- Is it really worth reporting that oil is up for 3 lousy cents?  LOL
Gene Kret
Gene Kret May 21, 2021 9:32AM ET
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Ahmad, you and your editors have some ******putting out this FAKE NEWS!!!! YOU SHOULD BE FIRED AND PUT OUT OF BUSINESS!!!
Gene Kret
Gene Kret May 21, 2021 9:30AM ET
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ALL FAKE NEWS!!!! The news media are cutting deals with thw US goernment to try and put fear into the public about Iran and oil. Its all BS !!!
Rick Baier
Rick Baier May 20, 2021 11:56PM ET
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Talks to restart Iran deal. I tell you Biden has exceded expectations. I thought it would take him a year to wreck the country.
JUSTIN ROBY
JUSTIN ROBY May 20, 2021 11:56PM ET
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Taking that lower oil price payoff from Iran for us to allow them a nuclear program.
Mike Wellons
Mike Wellons May 20, 2021 11:56PM ET
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Just the opposite Justin ... the nuclear deal stops Iran's nuclear development, not starts it. Trump administration and repubs pulled out of the deal, somehow thinking allowing Iran to restart nuclear production was a good thing. Crazy!
Shane Weddle
Shane Weddle May 20, 2021 11:56PM ET
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Mike Wellons The deal had no accountability in it. Iran mever stopped playing with their program as their was no accountability in it. This time will be no different. Deal or no deal nothing will stop them from getting a bomb except for covert sabotage.
Jo Riley
Jo Riley May 20, 2021 11:56PM ET
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Mike Wellons  Just the opposite Mike.  If you think the "nuclear deal" somehow prevents Iran's mullahs from further nuclear development, unfortunately you are deceived.  The mullahs have never stopped, nor changed their goals, but without cash it's harder to make progress. Now the US Marxist/Democrat party, just like during Obama's time have come to rescue Iran and provide hard cash.
danny Levine
danny Levine May 20, 2021 10:20PM ET
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good. gas is already so expensive
Murray Asher
Murray Asher May 20, 2021 9:44PM ET
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does it mean China won't get super cheap oil anymore? awe
Shane Weddle
Shane Weddle May 20, 2021 9:44PM ET
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Na im sure they will still get thwir special price from Iran.
 
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