Oil prices recorded their strongest rise since February with nearly a 9% increase during the week ending August 27 over an improvement in the COVID-19 situation in China and supply disruptions in the US Gulf of Mexico with an approaching hurricane expected to hit the region at the weekend.
International benchmark Brent crude traded at $71.52 at 1130 GMT on Friday, posting more than an 8.43% gain from Monday when trade at 0704 GMT registered at $65.96 per barrel.
American benchmark West Texas Intermediate (WTI) traded at $68.97 at the same time on Friday, decreasing over 10.78% relative to $62.26 a barrel on Monday.
Having declined by 9% last week over virus-induced demand worries coupled with weaker-than-expected industrial data from China and the US, both benchmarks started this week on a bullish sentiment as investors sought to cash in on last week’s low prices.
Although demand worries persisted during the week with rising coronavirus cases worldwide, the unexpected drop in US crude oil inventories supported higher oil prices.
The US Energy Information Administration (EIA) announced Wednesday that the country’s crude oil inventories fell by 3 million barrels, or 0.7%, during the week ending August 20, signaling improving demand. With last week’s decline, crude stocks in the country hit the lowest level since January 2020.
Oil prices also found support as the US Food and Drug Administration (FDA) gave full approval to Pfizer-BioNTech's COVID-19 vaccine on Monday, nine months after it rolled off the assembly lines under special emergency use authorization.
The approval was widely expected and could lead to more workplaces, universities, restaurants, gyms, and entertainment venues requiring full vaccination – a step experts say will increase mobility and will help a speedier return of fuel demand in the world’s largest oil-consuming country.
Containment of the Delta COVID-19 variant in the world’s second-largest, oil-consuming country, China, and possible disruptions to production in the Gulf of Mexico due to an approaching hurricane lent further price support.
Meanwhile, a fire on an offshore oil platform in Mexico, which reduced production by 444,000 barrels per day as of Tuesday, propped up prices, as the volume had been equivalent to the OPEC+ output increase for August.
However, prices came under pressure once again on Thursday following the resumption of production.
Tropical Storm Ida, which strengthened in the Caribbean Sea and is forecast to threaten the northern US Gulf Coast as a major hurricane this weekend, forced some oil companies, including bp, Shell, Chevron and BHP to fully or partially evacuate their offshore platforms in the area.
A possible halt in production on offshore platforms and oil rigs in the area is pushing prices higher when oil demand is still under demand pressure.
By Sibel Morrow