By Alex Nussbaum and Grant Smith
Futures in New York gained 4.7% for the week after prices held above $60 a barrel for a third day on Friday. Forecast to make landfall as a hurricane early Saturday, Barry has already curbed about half of U.S. Gulf of Mexico production.
Coupled with rising tensions between the U.K. and Iran, as well as a steep drop in American crude stockpiles, the storm helped offset concerns over weakening demand.
“After quite a few weeks of very bearish petroleum numbers the last two weeks have actually been supportive,” said Kyle Cooper, a consultant at Ion Energy Group in Houston. “It’s a bullish backdrop. I don’t think we’re going to run away here, but the mid-$50s to low $60s seems like a reasonable level.”
Still, the longer-term outlook looks less promising. The Organization of Petroleum Exporting Countries warned Thursday of a glut in 2020 as U.S. shale production surges. The International Energy Agency said Friday there had been a surprise pile-up of inventories in the first half of this year, and that OPEC may need to cut output to the lowest in 17 years to prevent another overhang.
The uncertainties have slowed the market’s momentum in recent days. While oil has traded higher in six of the last seven sessions, it’s also been stuck within a $1 range the past two days, the first time trading has been that narrow since April. An index of price volatility was at its lowest since May 22.
West Texas Intermediate crude for August delivery closed Friday 1 cent higher at $60.21 a barrel on the New York Mercantile Exchange. Brent for September settlement rose 20 cents, or 0.3%, to $66.72 a barrel on the ICE Futures Europe Exchange.
Barry may drop as much as 25 inches (64 centimeters) of rain in some places, according to an advisory from the U.S. National Hurricane Center. Gulf of Mexico operators have shut-in about 1 million barrels a day of oil production because of the storm, the Bureau of Safety and Environmental Enforcement said in a notice.
Meanwhile, Britain raised the threat level to the highest possible for ships operating in the Persian Gulf as tensions escalate in a region accounting for a third of seaborne petroleum trade. The U.K. government designated the region a level-3 risk on Tuesday, a day before British warship HMS Montrose had to stop Iranian vessels from impeding a BP Plc oil tanker as it exited the region, according to a person with knowledge of the matter.
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