Oil’s Hurricane Francine price blip won’t last past Monday, despite what energy market hopefuls might wish for.
Francine took around 40% of Gulf of Mexico oil and gas facilities offline for a day or two, but with the storm gone, companies have begun restarting production. As a result, prices are expected to lose much of the gains made during the final sessions of last week.
West Texas Intermediate (WTI) crude oil and Brent settled lower on Friday but then rose again in post-close trading, driven by hopes of more significant damage to the Gulf oil and gas facilities.
WTI crude for October delivery closed down 32 cents at US$68.65 per barrel, while November Brent crude, the global benchmark, lost 35 cents to US$71.72.
However, both rose in after-hours dealings, with WTI climbing back over US$69 to end the week at US$69.24, and Brent reaching US$72.18 per barrel.
By Saturday night, production was being restored without issues.
Prices had dropped to three-year lows earlier in the week, and the factors driving that decline—falling demand estimates for this year and next from OPEC, the International Energy Agency, and the U.S. Energy Information Administration—remain key influences on price confidence. Also significant is a surprising rise in the number of operating oil rigs in the U.S. last week.
On Friday, services company Baker Hughes reported that the number of oil rigs in the U.S. increased by five to 488, up from 483. This total is now just 12 rigs short of the 500-rig level seen at the end of 2023.
Additionally, three extra gas rigs were added, bringing the total to 97, while miscellaneous rigs remained unchanged at five. A year earlier, the U.S. had 515 oil rigs, 121 gas rigs, and five miscellaneous rigs in operation.
Overall, 590 rigs were operating in the U.S. this week, down from 641 a year earlier. Among U.S. states, Louisiana, Oklahoma, and Wyoming each added three rigs.
“Crude prices continued their rebound from a three-year low, despite the IEA’s warning that global oil demand growth is slowing sharply due to China’s cooling economy,” Saxo Bank stated in a note. “A general supportive risk-on sentiment, combined with hurricane disruptions in the U.S., is driving a fresh round of short-covering, with $75 being the key level to watch in Brent.”
Hurricane Francine made landfall in Louisiana as a Category 2 storm but quickly weakened to a tropical depression, leaving the state’s refining hub mostly unscathed. Refinery operations have resumed, though oil export ports have yet to reopen, according to the U.S. Energy Information Administration.
On Thursday, the IEA cut its global oil demand growth outlook for this year, largely due to weakness in China. Earlier in the week, OPEC also reduced its 2024 and 2025 global oil demand projections.
Crude oil prices extended their rally as Hurricane Francine disrupted supply from the Gulf of Mexico.
Brent crude gained 0.4% to US$72.24 per barrel, and West Texas Intermediate crude rose 0.4% to US$69.26 per barrel by early Friday. If the gains hold, both benchmarks will break a streak of weekly declines, Reuters reported. Brent crude fell below US$70 per barrel on Tuesday for the first time since late 2021.
Nearly 42% of the Gulf Coast region’s oil output was shut down as of Thursday, according to Reuters. Oil producers are assessing damage and conducting safety checks as they prepare to resume operations.
“Ongoing supply disruptions in Libya and larger-than-expected disruption in the Gulf of Mexico due to Hurricane Francine are keeping the oil market tight,” UBS analyst Giovanni Staunovo told Reuters.
A weaker U.S. dollar also provided support to oil prices, with the U.S. dollar index falling 0.3% to a one-week low of US$101.04 on Friday.