Oil climbs as storm approaches Gulf of Mexico production hub

© Reuters. FILE PHOTO: A sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, U.S. November 22, 2019. REUTERS/Angus Mordant

By Sonali Paul

MELBOURNE (Reuters) - Oil prices rose on Friday, on track to post big gains for the week, on worries about near term supply disruptions as energy companies began shutting in production in the Gulf of Mexico ahead of a potential hurricane forecast to hit on the weekend.

U.S. West Texas Intermediate (WTI) crude futures climbed 16 cents, or 0.2%, to $67.58 a barrel at 0111 GMT, clawing back a 1.4% loss on Thursday. WTI is headed for a weekly gain of more than 8%, which would be its strongest rise since early February.

Brent crude futures similarly rose 16 cents, or 0.2%, to $71.23 a barrel, after falling 1.6% on Thursday.

Brent is on track for a rise of more than 9% this week, its biggest weekly jump since June 2020 mostly on relief that China has contained an outbreak of the Delta variant.

Companies started airlifting workers from Gulf of Mexico oil production platforms on Thursday and BHP and BP (NYSE:BP) said they have begun to stop production at offshore platforms as a storm was brewing in the Caribbean Sea, forecast to barrel through the Gulf on the weekend.

Gulf of Mexico offshore wells account for 17% of U.S. crude oil production and 5% of dry natural gas production. Over 45% of total U.S. refining capacity lies along the Gulf Coast.

The prospect of U.S. Gulf supply outages helped turn the market around from losses on Thursday, which had been partly spurred by output returning at a Mexican oil platform following a fatal fire.

"The market may have more immediate concerns, with a storm building in the Caribbean. It's expected to become a powerful hurricane and potentially wreak havoc in the Gulf of Mexico and Texas early next week," ANZ Research said in a note.

Analysts also expect moves in the dollar to be a big factor on Friday, after U.S. Federal Reserve Chairman Jerome Powell gives a highly anticipated speech. The markets expect he may give some guidance on plans for tapering of bond purchases in the fourth quarter.

"If we do see an earlier tapering, our expectation is the U.S. dollar will lift, and that will put pressure on oil and other commodities," said Commonwealth Bank commodities analyst Vivek Dhar.