Oil Prices Fall Amid Resumption of U.S. Gulf Production

By Laila Kearney

NEW YORK (Reuters) – Oil prices dropped on Friday as crude production in the U.S. Gulf of Mexico resumed following Hurricane Francine, alongside a rise in the weekly U.S. rig count.

Brent crude futures settled at $71.61 a barrel, down 36 cents (or 0.5%). U.S. West Texas Intermediate crude (WTI) settled at $68.65 a barrel, down 32 cents (or 0.5%).

As U.S. Gulf Coast production and refining activities restart, investors opted to offload oil contracts before the weekend. Bob Yawger, director of energy futures at Mizuho, stated, “You could come back Monday and everything is fine – the refineries are running at 100%, everyone is back on the platform, oil comes back and gasoline is coming out of the refinery – and the market could potentially pull back exponentially.”

For the week, oil futures finished with gains following sharp storm-related increases earlier in the week, breaking a streak of declines. Brent recorded an increase of about 0.8% since last Friday’s close, while WTI marked a roughly 1.4% gain.

Official data revealed that the storm nearly shut in 42% of oil production in the region, which accounts for about 15% of U.S. output.

“These cuts are expected to prove brief and are unlikely to impact crude balances significantly given the importance of shale production, which constitutes the major portion of U.S. output,” said Ritterbusch.

Crude prices also fell due to the U.S. rig count from energy services group Baker Hughes, which reported the largest weekly rise in oil and natural gas rigs in a year. The oil and gas rig count increased by eight to 590, returning to mid-June levels, with crude oil rigs rising by five to 488 and gas rigs increasing by three to 97.

Additionally, money managers cut their net long crude futures and options positions in New York and London by 27,493 contracts, down to 59,741 for the week ending September 10, as per the U.S. Commodity Futures Trading Commission.

Both the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) reduced their demand growth forecasts this week, pointing to economic difficulties in China, the world’s largest oil importer.

U.S. oil stockpiles also rose last week amid increased crude imports and decreased exports, with weak fuel demand, according to the Energy Information Administration.

Investors are now looking ahead to the U.S. Federal Reserve’s two-day policy meeting next week, where it’s widely anticipated that interest rates will be cut on Wednesday.