Oil dips as US storm-hit supply makes slow return

Oil prices fell on Friday as more supply came back online in the US Gulf of Mexico following two hurricanes, but both benchmark contracts are on track to post weekly gains of around 4 per cent as the recovery in output is seen lagging demand.

Brent crude futures fell 14 cents, or 0.2 per cent, to $75.53 a barrel at 0307 GMT, giving up most of the previous session's 21 cent gain.

US West Texas Intermediate (WTI) crude futures were11 cents, or 0.2 per cent, lower at $72.50 a barrel, after settling unchanged on Thursday.

Both contracts were on course to climb nearly 4 per cent for the week as output in the US Gulf of Mexico has recovered more slowly than expected after Hurricane Ida damaged facilities in August and tropical storm Nicholas hit this week.

As of Thursday, about 28 per cent of US Gulf of Mexico crude production remained offline, two-and-a-half weeks after Hurricane Ida hit.

"It's still taking longer than people thought in terms of that coming back. That's been a supportive factor in the market," Commonwealth Bank commodities analyst Vivek Dhar said.

"We're going to go into more (supply) deficit conditions -that certainly seems to be the view."

Preliminary data from the US Energy Information Administration showed US crude exports in September have slipped to between 2.34 million bpd and 2.62 million bpd from 3 million bpd in late August.

Dhar also pointed to data from the International Energy Agency this week showing OECD oil inventories falling to a low in November, as the recovery in fuel demand is expected to outpace supply.

The risk of weakened demand in Southeast Asia has abated as COVID-19 cases appear to have peaked in countries like Indonesia, Malaysia and Thailand, he said.

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