Oil Prices Rise, Poised for Positive Week Amid Rebound from 3-Year Lows

Oil prices experienced a rise during Asian trading on Friday, signaling a potentially favorable end to the week as concerns about supply disruptions caused by Hurricane Francine contributed to a recovery from near three-year lows.

Despite this uptick, prices are still recovering from significant losses incurred last week and are only slightly above this week’s lows. Ongoing worries about declining demand are limiting further increases in crude oil prices. November futures increased by 0.8% to $72.57 per barrel, while another contract rose by 0.9% to $69.58 per barrel. If these gains persist, both contracts are likely to break a streak of weekly declines.

Hurricane Francine had a substantial impact on oil production and refinery operations in the Gulf of Mexico, where it made landfall in Louisiana earlier in the week before being downgraded to a tropical storm. Numerous offshore platforms in the storm’s path were evacuated, and activities related to crude oil and shipping terminals were suspended. The Gulf of Mexico is responsible for approximately 25% of U.S. oil production; therefore, any prolonged halts in production could lead to tighter supplies.

Despite this week’s positive momentum, oil prices remain close to three-year lows due to ongoing demand concerns. Weak economic indicators from China have heightened fears of reduced demand from the world’s largest oil importer. Both the Organization of the Petroleum Exporting Countries and the International Energy Agency have recently lowered their oil demand forecasts for 2024, adjusting their outlooks based on concerns related to China. However, they noted that demand growth is expected to come from other parts of Asia, particularly India, which is experiencing significant economic growth.

In the United States, reports of a significant increase in gasoline and distillate inventories have raised concerns that fuel demand is weakening as the end of the summer travel season approaches.