Oil drops as storm-hit US supplies return to market

TORC oil and gas pump jack near Granum, Alberta, Canada, May 6, 2020. REUTERS/Todd Korol/File Photo

  • Oil drops but still poised for weekly gains of over 3%
  • Supports the slow recovery of production after Ida prices
  • The dollar index reached a multi-week high

NEW YORK (Reuters) – Oil prices fell on Friday as energy companies in the U.S. Gulf of Mexico resumed production after successive hurricanes in the region halted production.

Both benchmarks Brent and US crude were on track for weekly gains of 3.2% and 3.3%, respectively, due to recent supply tightness due to the hurricane outage.

Brent crude futures were down 42 cents at $75.25 a barrel by 12:48 EST (1648 GMT). US West Texas Intermediate crude futures fell 60 cents to $72.01 a barrel.

Friday’s decline came after five consecutive sessions of gains for Brent crude. On Wednesday, Brent crude hit its highest level since late July, and US crude hit its highest level since early August.

“The reason oil prices have reached such high levels in the past few days is clearly supply disruptions and declining inventories, so after US oil production is back, oil is dropping as expected,” said Nishant Bhushan, oil market analyst at Rystad Energy.

Crude oil exports from the Gulf Coast are flowing again after Hurricanes Nicholas and Ida depleted 26 million barrels of offshore production. Reuters reported on Thursday that restarts continued with about 28% of US crude production shutting down in the Gulf of Mexico. Read more

The dollar climbed to a multi-week high on Friday, making dollar-denominated crude oil more expensive for those using other currencies. The dollar got a boost from better-than-expected US retail sales data on Thursday. (DXY.) Read more

Friday’s poll showed that US consumer confidence stabilized in early September after falling the previous month to its lowest level in nearly a decade, but consumers remain concerned about inflation. Read more

(Covering by Stephanie Kelly in New York). Additional reporting by Julia Payne in London, Sonali Paul in Melbourne and Roslan Khasawneh in Singapore.

Our criteria: Thomson Reuters Trust Principles.

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