Oil futures edged up on Friday as U.S. Gulf of Mexico crude output was halved by disruptions caused by a tropical storm, but concerns over a global surplus in the months ahead limited gains.
Brent crude futures were up 31 cents to $66.83 a barrel by 11:21 a.m. EDT (1521 GMT). U.S. West Texas Intermediate (WTI) crude futures gained 16 cents at $60.36 a barrel.
Brent has climbed 4% so far this week while WTI was on track for a 4.9% rise. Both registered declines last week.
Tropical Storm Barry, which is expected to become a hurricane just before making landfall this weekend with winds of at least 74 mph (119 kph), boosted crude futures as oil companies in the Gulf of Mexico reduced production.
Companies cut more than 1 million barrels per day (bpd) of output, or 53% of the region’s production, as the storm headed for possible landfall on the Louisiana coast on Saturday.
Warren Patterson, ING’s head of commodity strategy, said that concerns will soon grow around the amount of refining capacity at risk.
“Disruption to refining operations as a result of the storm would likely prove supportive for product cracks, and given the growing importance of the United States as a refined product exporter, this strength would likely be felt in other regional markets as well,” he said.
The International Energy Agency (IEA) forecast surging U.S. oil output will outpace sluggish global demand and lead to a large inventory build around the world in the next nine months.
The world energy watchdog’s report comes on the heels of the Organization of the Petroleum Exporting Countries’ prediction on Thursday of a return of a crude glut next year despite an OPEC-led pact to restrain supplies.
“The IEA report laid bare what the market is staring down and what OPEC is staring down next year, and really for the balance for this year, and that will continue to be a headwind,” said John Kilduff, a partner at Again Capital LLC in New York. “For now, the storm supports,” Kilduff said.
The market looked towards the weekly U.S. oil rig count, an indicator of future production, at 1 p.m. EDT. The United States last year became the world’s top oil producer and was forecast to set another record in output production this year.
The market also remained on edge as tensions intensified between Iran and the West. Tehran on Friday said that Britain was playing a “dangerous game” after last week’s seizure of an Iranian tanker on suspicion it was breaking European sanctions by taking oil to Syria.