Oil prices fell around 2% on Friday as supply cuts in the US Gulf of Mexico
Oil prices fell around 2% on Friday amid expectations that supply disruptions in the US Gulf of Mexico will be short-term, while recession fears clouded the demand outlook.
Futures, however, closed with weekly gains.
Brent crude futures fell $1.45, or 1.5%, to $98.15 per barrel, while West Texas Intermediate (WTI) crude fell $2.25, or 2.4%, to $92.09 per barrel. Both contracts gained more than 2% on Thursday.
Brent gained 3.4% this week after falling 14% last week on fears that rising inflation and interest rates will affect economic growth and fuel demand. WTI rose 3.5%.
A Louisiana port official said on Friday that crews are expected to replace a damaged piece of oil pipeline by the end of the day, allowing production to resume on seven offshore US Gulf of Mexico oil platforms.
On Thursday, Shell, the leading US Gulf of Mexico oil producer, said it had stopped production at three deep-water platforms in the region. The three platforms were designed to produce up to 410,000 barrels of oil per day.
Shell spokeswoman Cindy Babski said the Amberjack pipeline, one of two pipelines shut down due to the leak, has been restarted at low capacity. He said the Mars pipeline remains offline but is expected to be operational later on Friday.
An economic slowdown is visible, but it's unclear whether it's as big of a slowdown as some of the recent outlooks have predicted. Demand will decrease or increase, it is unknown, but supply is still the main concern.
Europe's sanctions on Russian oil will be tightened later this year, with the six-month coordinated energy release agreed by the United States and other advanced economies planning to get things back on track by the end of the year.
The market has also absorbed the conflicting demand outlooks from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA).
OPEC on Thursday lowered its forecast for world oil demand growth in 2022 by 260,000 barrels per day (bpd). However, now expects demand to increase by 3.1 million barrels per day this year.
Meanwhile, the IEA raised its demand growth forecast to 2.1 million barrels, citing the switch from gas to oil in electricity generation.
The IEA also increased its Russian oil supply outlook by 500,000 barrels per day for the second half of 2022, but also said OPEC will struggle to increase production.
Import prices in the United States fell for the first time in seven months in July, aided by a strong dollar and lower fuel and nonfuel costs, while consumers' one-year inflation outlook ebbed in August, the latest signs that price pressures may have peaked.
Baker Hughes Co said US oil rigs rose three to 601 this week. The number of rigs, which is an indicator of future production, is not promising for growth.
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