Oil Heads Towards Weekly Gains As Producers Slowly Recover From Ida

Meanwhile, China's release of crude from reserves is now regarded in a bullish  light: File Image/ Pixabay

The slow but steady pace of production recovery in the Gulf of Mexico following Hurricane Ida was the main reason why crude prices on Friday were headed towards achieving a third week of gains, while Louisiana refineries resuming operations raised demand for the commodity.

As of 9:32 a.m. EDT Friday, West Texas Intermediate was up 2.48 percent at $69.80 per barrel and  Brent had risen by 2.25 percent to trade at $73.02.

Andrew Lebow, senior partner at Commodity Research Group, said, "The market is now laser focused on the supply situation in the U.S.; the losses from the extended outage in the Gulf are being felt more."

For the record, Marathon Petroleum's 578,000 barrel per day (bpd) Garyville, Louisiana refinery is back in operation, and Exxon Mobil Corp. secured another 1.5 million barrels from the Strategic Petroleum Reserve for its Baton Rouge refinery, which went back on line Thursday.

However, the storm reportedly caused so much damage to a New Orleans-area  Phillips 66 refinery that repairs may be too costly and the better option would be to close the facility; this may complicate Phillips 66's efforts to unload the asset as was the intention prior to Ida, because of "market conditions and the evolving energy landscape," according to company spokesman Bernardo Fallas.

In other oil related news on Friday, Libya's oil production was yet again jeopardized, this time due to a power struggle between the government in Tripoli and the National Oil Corp.; the standoff could potentially deprive the North African country of substantial revenue as crude trades above $70 per barrel, as well as pressure the global oil market in the wake of the production outages caused by Ida.

Also, while China's unexpected release of crude from its reserve depressed oil markets in the previous session, Oilytics stated in a report that the release "for the first time can be seen as bullish, as it's in preparation for the demand bump in 4Q," and that inventories "will have to be eventually replaced, so demand is just getting deferred."