Oil falls 2% on expectations of easing supply disruption in the US Gulf

Oil prices fell nearly 2% on Friday on expectations that supply disruptions in the US Gulf of Mexico would be short-lived, while recession fears overshadowed the demand outlook.

Futures, however, were still on track for weekly gains. Brent crude fell $1.45, or 1.5%, to $98.15 a barrel, while US West Texas Intermediate (WTI) crude fell $2.25, or 2.4%, to $92.09 a barrel. Both contracts had gained more than 2% on Thursday. "We're pulling back a bit after yesterday's big rally," said Phil Flynn, an analyst at Price Futures Group. Brent gained 3.4% this week after a 14% drop last week on concerns that rising inflation and interest rates will hit economic growth and fuel demand. WTI rose 3.5%. A Louisiana port official said crews were expected to replace a damaged oil pipeline segment nL1N2ZO154 by the end of the day on Friday, allowing production to resume at seven offshore US Gulf of Mexico oil platforms. [nL1N2ZO154] On Thursday, Shell (LON:RDSa), the leading US Gulf of Mexico oil producer, announced that it has halted production at three deepwater platforms in the region. These three platforms are designed to produce a total of up to 410,000 barrels of oil per day. Shell spokeswoman Cindy Babski said the Amberjack pipeline, one of the two pipelines shut down due to the leak, has resumed operation at reduced capacity. She said the Mars pipeline remained offline but was expected to resume operation later on Friday. The market also absorbed contrasting demand views from the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA). "We are seeing an economic slowdown, but it is unclear whether it is as big a slowdown as some recent outlooks have predicted," said Ole Hansen, head of commodity strategy at Saxo Bank. "Demand will be bumpy, but supply is still the main concern." European sanctions on Russian oil will tighten later this year, while the six-month coordinated energy release agreed by the US and other advanced economies will also expire by the end of the year.