By Adedapo Adesanya
Oil prices rose by 2 per cent on Friday, posting their biggest weekly gains in over a year as energy firms began shutting production in the Gulf of Mexico ahead of a major hurricane expected to hit early next week.
The global benchmark crude, Brent, rose by 2.29 per cent or $1.63 to sell at $72.70 per barrel while the West Texas Intermediate (WTI) improved by 1.96 per cent or $1.32 to trade at $68.72 per barrel.
For the week, Brent gained over 11 per cent and WTI rose more than 10 per cent, the biggest weekly percentage gains for both since June 2020.
The price of the commodity rose as producers on Friday shut 59 per cent of Gulf of Mexico crude production as the storm moved towards the key offshore oilfields in the US.
Hurricane IDA is expected to become a major hurricane over the weekend and strike the US Gulf Coast and ahead of this, oil and gas companies raced to complete evacuations from offshore Gulf of Mexico platforms before it becomes a major storm early next week.
The Gulf of Mexico offshore wells account for 17 per cent of US crude production, while over 45 per cent of total US refining capacity lies along the Gulf Coast.
Oil prices also received support from a decline in the US Dollar which fell to a one-week low versus a basket of other currencies following comments by the Federal Reserve.
The Federal Reserve on Friday affirmed an ongoing economic recovery and explained that there is no rush to tighten monetary policy, therefore, weakening the greenback.
A weaker US dollar makes oil less expensive for holders of other currencies.
The slower-than-expected recovery of Mexico’s oil production following a fire last Sunday also supported prices for longer than initially anticipated.
Pemex had recovered 71,000 barrels per day of the oil production lost after the fire by re-connecting 35 wells and was targeting another 110,000 barrels per day of production but market analysts believe that this could prove more challenging than the company thinks.
The market will also be looking out for the monthly meeting of the Organisation of the Petroleum Exporting Countries and allies (OPEC+) on September 1 to discuss its plan from July to raise output by 400,000 barrels per day every month for the next several months.
