Oil capped its best week since the middle of last month as Tropical Storm Barry gained strength, approaching refineries in Louisiana and leaving deserted offshore platforms on its path.
Futures in New York gained 4.7 percent for the week after prices held above US$60 a barrel for a third day on Friday.
Forecast to make landfall as a hurricane early yesterday, Barry has already curbed about half of US Gulf of Mexico production.
Coupled with rising tensions between the UK and Iran, as well as a steep drop in US 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, Texas. “It’s a bullish backdrop. I don’t think we’re going to run away here, but the mid-US$50s to low US$60s seems like a reasonable level.”
Still, the longer-term outlook looks less promising.
OPEC on Thursday warned of a glut next year as US shale production surges.
The International Energy Agency on Friday said there had been a surprise pile-up of inventories in the first half of this year and that OPEC might need to cut output to the lowest in 17 years to prevent another overhang.
While oil has traded higher in six of the past seven sessions, it has also been stuck within a US$1 range in 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 (WTI) crude for August delivery on Friday closed US$0.01 higher at US$60.21 a barrel on the New York Mercantile Exchange. The contract is up 4.7 percent for the week.
Brent for September settlement rose US$0.20, or 0.3 percent, to US$66.72 a barrel on the ICE Futures Europe Exchange, up 8 percent for the week.
Barry might drop as much as 64cm of rain in some places, according to an advisory from the US National Hurricane Center.
Gulf of Mexico operators have shut in about 1 million barrels a day of oil production because of the storm, the US Bureau of Safety and Environmental Enforcement said in a notice.
Meanwhile, the UK raised the threat level to the highest possible for ships operating in the Persian Gulf as tensions escalate in a region accounting for one-third of seaborne oil trade.
The British government on Tuesday designated the region a level-3 risk, a day before British warship HMS Montrose had to stop Iranian vessels from impeding a BP PLC oil tanker as it exited the region.
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