Oil jumps 3% to highest level in nearly five weeks on supply losses

An aerial view shows pumpjacks in the South Belridge Oil Field on April 24, 2020 near McKittrick, California.
David McNew | Getty Images

Oil climbed on Thursday on support from output shutdowns ahead of a storm in the U.S. Gulf of Mexico and the prospect of more supply losses in Norway.

Oil and gas workers have withdrawn from offshore U.S. Gulf production facilities as Hurricane Delta was forecast to intensify into a powerful, Category 3 storm. Nearly 1.5 million barrels of daily output was halted.

Brent crude was up 86 cents, or 2%, to $42.85 barrel, after falling 1.6% on Wednesday. West Texas Intermediate (WTI) crude settled $1.24, or 3.1%, higher at $41.19 per barrel after falling 1.8% on Wednesday.

"Hurricane Delta is a crude oil supply event, and with all of this Gulf of Mexico production offline, we will probably lose more than 5 million barrels of crude oil due to the storm," said Andrew Lipow, President of Lipow Oil Associates in Houston, Texas.

"However, the storm is having a limited impact on gasoline and diesel demand," he added.

Oil also gained support from the prospect of more production outages in the North Sea because of a workers' strike. The major Johan Sverdrup field will have to shut unless the strike ends by Oct. 14.

The production losses offset concerns about demand, rising coronavirus cases and rising U.S. crude inventories.

Renewed optimism over some U.S. coronavirus relief aid also supported the market.

After shutting down talks over a larger U.S. stimulus deal, President Donald Trump wrote on Twitter that Congress should pass funding for airlines, small businesses and stimulus checks for individuals, fuelling hopes for relief.

The Organization of the Petroleum Exporting Countries faces a new challenge from rising output in Libya, an OPEC member exempted from cutting output.

On Thursday, OPEC Secretary General Mohammad Barkindo said the worst was over for the oil market.