Oil prices dip as US output resumes post-storm and rig count increases

16 Sep 2024 CW Team

Oil prices declined after US Gulf of Mexico crude production resumed following Hurricane Francine, and data indicated a weekly increase in the US rig count.

Brent crude futures closed at $71.61 per barrel, a decrease of 36 cents, or 0.5%. US West Texas Intermediate (WTI) crude settled at $68.65 per barrel, down by 32 cents, or 0.5%.

With production and refining activities on the US Gulf Coast restarting, investors chose to offload oil contracts ahead of the weekend. Bob Yawger, the director of energy futures at Mizuho in New York, explained that investors were cautious, suggesting that by Monday, the refineries could be operating at full capacity, with all platforms back in action, oil production resuming, and gasoline flowing from the refineries. He indicated that this scenario could lead to a significant market pullback.

For the week, oil futures saw gains following sharp increases earlier in the week due to the storm, breaking a pattern of declines. Brent crude registered an increase of approximately 0.8% since the close of the previous Friday's session, while WTI recorded a gain of around 1.4%.

Official data showed that the storm had nearly halted 42% of oil production in a region that constitutes about 15% of US output. Ritterbusch commented that these production cuts are expected to be brief and, in the broader context, are unlikely to cause significant shifts in crude balances, given the dominance of shale production in US output.

Crude prices were also impacted by the US rig count from energy services group Baker Hughes, which reported the largest weekly increase in oil and natural gas rigs in a year. The oil and gas rig count rose by eight in the week ending September 13, bringing the total to 590, a return to mid-June levels. This increase was the largest since the week ending September 15, 2023. Crude oil rigs increased by five to 488, while gas rigs rose by three to 97.

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