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Oil prices extended their upward momentum on Friday, driven by production disruptions in the U.S. Gulf of Mexico, where Hurricane Francine forced the evacuation of platforms ahead of its landfall on the Louisiana coast. This rally comes after a rocky start to the week that saw Brent crude briefly dip below $70 per barrel, marking a significant recovery for both Brent and U.S. West Texas Intermediate (WTI) crude.
By 03:22 GMT, Brent crude futures rose by 34 cents (0.5%) to $72.31 per barrel, while U.S. WTI crude futures gained 39 cents (0.6%) to $69.36 a barrel. If these gains hold, both benchmarks will end a series of weekly declines, with Brent on track for a 1.7% weekly increase and WTI set to rise over 2%.
Production Disruptions Boost Prices
The uptick in oil prices is largely attributed to supply constraints caused by Hurricane Francine. As producers conducted damage assessments and safety checks, estimates of the disruption began to emerge. UBS analysts projected a 50,000 barrel-per-day (bpd) drop in September’s output from the region, while FGE analysts estimated a more substantial loss of 60,000 bpd, bringing total production in the Gulf to 1.69 million bpd. Official reports indicated that nearly 42% of the region’s oil production was shut down as of Thursday.
Muted Demand Outlook Poses Risks
Despite the supply disruptions, concerns about demand weighed heavily on the market. Both the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) revised their demand growth forecasts downward this week. A key factor is China, the world’s largest oil importer, where economic struggles are curbing demand. Data from Chinese customs showed a 3.1% year-on-year decline in crude oil imports from January through August.
The U.S. also faces demand challenges. Gasoline and distillate futures hit multi-year lows this week, signaling weaker-than-expected consumption in the world’s largest petroleum market. U.S. oil and fuel inventories rose last week, reflecting a sharp decline in demand, according to the U.S. Energy Information Administration (EIA).
While production disruptions in the Gulf of Mexico provide short-term support to prices, the underlying demand weakness in both China and the U.S. remains a key concern for the oil market’s long-term outlook.
