A weaker U.S. dollar, a more optimistic demand outlook in China and supply outages in the Gulf of Mexico were the catalysts that drove crude prices higher this week, Oilprice reports. 

Crude markets faltered earlier this month as the resurgent pandemic threatened demand in China and the United States, but prices have since recovered. The OPEC+ coalition’s careful stewardship of the oil market has kept prices high enough to support the revival of the global petroleum industry, and largely avoided the kind of spike that could threaten the world’s economic recovery. The group doesn’t face the imminent prospect of renewed supplies from Iran, as talks to lift U.S. sanctions have stalled. And oil demand appears to robust enough to absorb the extra barrels, Bloomberg said.

With fundamentals largely remaining the same as they were last week, oil prices nevertheless are poised to post sizable gains, with global benchmark Brent trading above $72 per barrel and WTI climbing to just south of $69 per barrel. The blaze at the Ku-Maloob-Zaap offshore platform in Mexico started it off, taking some 400,000 bpd of crude out of the market for the time being, and the forced evacuation of staff from production platforms in the Gulf of Mexico ahead of Tropical Storm Ida finished off the supply disruption, overpowering COVID concerns and the weakness of the physical market, Oilprice said.

Oil prices rose more than 2% on Friday and were on track for their biggest weekly gains in over a year as energy firms began shutting production in the U.S. Gulf of Mexico ahead of a major hurricane expected to hit early next week. U.S. oil and gas companies on Friday raced to complete evacuations from offshore Gulf of Mexico platforms as Tropical Storm Ida advanced toward oilfields that provide 17% of the nation’s oil production.

The storm’s winds intensified early Friday as it moved through the Caribbean Sea at 15 miles per hour (24 kph) and Ida could become a hurricane as it nears western Cuba. It forecast Ida will become a major hurricane, packing winds of at least 111 mph (178 kph), by early Sunday. Top Gulf of Mexico oil producer Royal Dutch Shell Plc said it suspended production at seven offshore platforms and BP Plc stopped work at four platforms. Both are continuing to evacuate workers, the companies said. BHP, Chevron, and Equinor also pulled workers from offshore facilities. Over 45% of U.S. refining capacity lies along the Gulf Coast.

Louisiana’s governor called on residents to prepare for a major storm, and two coastal communities on Friday asked residents to move to higher ground. Five storms made landfall in Louisiana last year, causing billions of dollars in damage. Ida is “expected to be a dangerous major hurricane when it reaches the northern Gulf Coast on Sunday,” the NHC said. “Potentially devastating wind damage could occur where the core of Ida moves onshore.”A path over the Gulf’s ultra warm waters will intensify the storm and lead to flooding rainfall well inland. “Water temperatures are 85 degrees to 88 degrees Fahrenheit (29-31 degree Celsius), that’s anomalously high, 3 to 5 degrees higher than it normally would be,” said Jim Foerster, chief meteorologist for DTN, which provides weather advice to oil and transportation companies. The storm could bring a life-threatening tidal surge anddamaging winds, in addition to heavy rainfall to coastal areas by Sunday and Monday, the NHC said.

U.S. petroleum inventories declined by -5 million bbl last week with drawdowns in crude (-3 million bbl) and gasoline (-2 million bbl) only partially offset by builds in jet (+1 million) and distillates (+1 million). Inventories are now below the pre-epidemic five-year seasonal average for 2015-2019 across the whole complex, including crude (-2%), gasoline (-1%) and distillates (-4%), and are still trending lower. U.S. gasoline supplied to the domestic market has averaged less than -2% below the pre-epidemic five-year average over the last four weeks, as consumption has recovered following the epidemic, lockdowns and the business cycle slump in 2020/21, Reuters reports.

US refiner Phillips 66announced it would market its 255,000 bpd Alliance refinery in Louisiana, citing the “evolving energy landscape” as the primary trigger for such a decision. The 50-year old plant produces gasoline and diesel for the domestic market. Norwegian oil major Equinoris intent on quitting Mexico’s upstream sector as part of its 2050 ambition of becoming net-zero by 2050, however was thus far unable to find suitable buyers for its assets – self-operated Block 01 and Block 03 in the Salina Basin. Venezuela’s state oil company PDVSA is offering international buyers 20 MMbbls of heavy crude for September lifting, with prices ranging from $35 to $41 per barrel, S&P Platts reports. Venezuela is seeking to ramp up exports as July outflows totaled 520kbpd, Oilprice said.