Oil price retreats 2% on US Gulf of Mexico supply news

Brent crude futures fell $1.45, or 1.5%, to settle at $98.15 a barrel, while US West Texas Intermediate (WTI) crude fell $2.25, or 2.4%, to settle at $92.09 a barrel. Both contracts gained more than 2% on Thursday.

Oil prices plunged around 2% on Friday, on expectations that supply disruptions in the US Gulf of Mexico would be short-term, while recession fears clouded the demand outlook. Futures, however, were still on track for a weekly gain.

Brent gained 3.4% this week after last week’s 14% tumble on fears that rising inflation and interest rates will hit economic growth and demand for fuel. WTI rose 3.5%. Crews were expected to replace a damaged oil pipeline piece by the end of the day on Friday, a Louisiana port official said, allowing for the resumption of production at seven offshore US Gulf of Mexico oil platforms.

Top US Gulf of Mexico oil producer Shell said it halted production at three deepwater platforms in the region. The three platforms are designed to produce up to 410,000 barrels of oil per day combined. The Amberjack pipeline, one of two stopped by the leak, has restarted at reduced capacity, Shell spokesperson said. The Mars pipeline remained offline but is expected to resume operation later on Friday, she said.

The market also absorbed contrasting demand views from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA).

European sanctions on Russian oil are due to tighten later this year while a six-month coordinated energy release agreed by the United States and other developed economies is due to run its course by the end of the year.

In the United States, import prices fell for the first time in seven months in July, helped by a strong dollar and lower fuel and nonfuel costs, while consumers’ one-year inflation outlook ebbed in August, the latest signs that price pressures may have peaked.