Oil Prices Decline as US Output Resumes Post-Storm and Rig Count Increases, Reports Reuters

By Laila Kearney

NEW YORK (Reuters) – Oil prices dropped on Friday as crude production in the U.S. Gulf of Mexico began to recover following Hurricane Francine, coupled with an increase in the weekly U.S. rig count.

Brent futures settled at $71.61 per barrel, a decrease of 36 cents, or 0.5%. U.S. West Texas Intermediate crude (WTI) ended the day at $68.65 per barrel, down 32 cents, or 0.5%.

As production and refining activities in the U.S. Gulf Coast come back online, investors chose to sell off oil contracts ahead of the weekend, according to Bob Yawger, director of energy futures at Mizuho in New York.

"You could come back Monday and everything is fine — the refineries are running at full capacity, everyone is back on the platform, oil is flowing, and gasoline is being produced in the refineries — and the market could potentially rebound significantly," Yawger noted.

Despite the decline on Friday, oil futures concluded the week higher following sharp increases earlier in the week due to the storm. Brent saw approximately a 0.8% rise compared to last Friday’s close, while WTI recorded around a 1.4% gain.

Recent data revealed that the storm had nearly disrupted 42% of the oil production in the affected region, which contributes to about 15% of U.S. output.

"These disruptions are anticipated to be temporary and are unlikely to significantly impact crude balances, considering the vital role of shale production in U.S. output," said Ritterbusch.

Crude prices were also pressured by a report from energy services group Baker Hughes, which highlighted the largest weekly increase in oil and gas rigs in a year. The overall rig count rose by eight to 590, reaching levels not seen since mid-June. Oil rigs specifically increased by five to 488, while gas rigs rose by three to 97.

Additionally, money managers reduced their net long positions in crude futures and options in both New York and London by 27,493 contracts, totaling 59,741 in the week ending September 10, according to the U.S. Commodity Futures Trading Commission.

Both the Organization of the Petroleum Exporting Countries and the International Energy Agency recently lowered their demand growth forecasts, citing economic challenges in China, the world’s largest oil importer.

U.S. oil inventories also saw an uptick last week, driven by an increase in crude imports and a decline in exports, as fuel demand weakened, according to the Energy Information Administration.

Looking ahead, investors are anticipating the U.S. Federal Reserve’s two-day policy meeting next week, where a reduction in interest rates is widely expected.