Oil prices are poised for weekly gains

Crude oil prices extended Thursday’s gains earlier today and looked to snap a three-week losing streak if the gains hold.

They could reverse, however, as Gulf of Mexico oil producers START to restart operations following Hurricane Francine. The hurricane caused the shutdown of up to 42% of Gulf production, equal to about 730,000 barrels per day, supporting prices.

However, more than that has been affected in terms of total production, according to UBS analysts, who estimate the total amount affected at 1.5 million barrels per day. That would cut monthly output in the region by 50,000 bpd, analysts estimated.

It is worth noting, however, that prices showed somewhat surprising resistance to the International Energy Agency’s latest monthly report, which reviewed lowered the outlook for oil demand growth by 70,000 bpd to 900,000 bpd. The IEA cited weaker Chinese demand as the reason for the revision.

Normally, revisions to the IEA’s demand growth outlook cause an immediate reaction in the oil market, but this month the disruption to US production caused by Francine appears to have offset the effect. Alternatively, traders have already weighed in on the revision after OPEC also revised its outlook for demand growth down earlier this week.

“A previous decline to a near three-year low required some short-term breathing room to end the week as market participants price (in) short-term oil supply disruptions from Hurricane Francine,” market strategist IG Yeap Jun. Rong said Reuters.

“The prevailing themes for the rest of the year are weakening Chinese demand and OPEC+’s subsequent strategy of potentially defending market share in this warm demand environment,” Commonwealth Bank of Australia analyst Vivek Dhar said. said Bloomberg.

Oil gained further support this week on expectations that the US Federal Reserve will decide to start cutting interest rates at its next meeting, scheduled for September 17-18.

By Irina Slav for Oilprice.com

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