As expected, the mass shutting of oil production in the Gulf of Mexico ahead of a potential hurricane caused crude prices to rise on Friday - minimally, but on track for a substantial weekly gain.
West Texas Intermediate climbed 16 cents to $67.58 per barrel at 0111 GMT and was headed for a weekly gain of more than 8 percent, which would be its strongest rise since early February; Brent also rose 16 cents to $71.23 per barrel.
Earlier, BHP and BP stopped production at offshore platforms as a storm in the Caribbean Sea is expected to strike through the Gulf in the form of Hurricane Ida over the weekend; as of Friday, U.S. producers had halted 59 percent of Gulf production.
Ed Morse, head of commodities research, Citigroup Inc.
There is good evidence that the downturn in oil prices was temporary and overdue
ANZ Research said in a note, "The market may have more immediate concerns, with a storm building in the Caribbean: it's expected to become a powerful hurricane and potentially wreak havoc in the Gulf of Mexico and Texas early next week."
The storm detracted from the usual analytical concerns over rising Covid infections due to the Delta variant impacting demand, but oil prices rising this weeks seem to herald a renewed confidence in demand regardless of infections: "The uncertainty over the world economy and the recovery in growth in China have largely been overcome," said Ed Morse, head of commodity research at Citigroup Inc.
He added, "There is good evidence that the downturn in oil prices was temporary and overdue, and that if the recovery continues, OPEC+ is likely to stick to the plan" - a reference to the Organization of the Petroleum Exporting Countries moving forward with their planned revival of oil production when they meet next week.
Bullish expectations were voiced in the previous session by Miller Tabak, which noted that the rare phenomenon of oil's shorter-term moving average crossing above its longer-term moving average could well mean a rally of anywhere from 20-50 percent, if past examples are anything to go by.
On Friday the Fujairah Oil Terminal (FOT) in the United Arab Emirates demonstrated its confidence in a bullish market ahead, by announcing a $45 million upgrade to the infrastructure of its storage facilities.
Steve Bickerton, senior managing director at Prostar Capital and chairman of FOT, said, "Whilst the port has historically been one of the largest bunker fuel ports in the world, I think we're potentially going to see that being taken over and dwarfed by the crude oil market."
The expansion will connect its terminal to the Port of Fujairah's very large crude carrier loading facility and the Abu Dhabi Crude Oil Pipeline; the project is expected to be completed by the end of next year.