Oil futures: Crude rebounds over 2%, weather system forms in Gulf of Mexico

London (Quantum Commodity Intelligence) – Crude oil futures staged a robust recovery Friday, gaining more than 2% as optimism regarding demand at least briefly usurped talk of Iranian barrels returning to the market.

Brent futures for front-month July were trading at $66.61/barrel (1800 GMT), compared to Thursday's settle of $65.11/b, a gain of 2.30%.

At the same time July WTI was trading at $63.67/b, 2.79% up from Thursday's settlement of $61.94/b.

Prior to Friday's rebound, oil prices were down by around 7% since Tuesday when Brent briefly traded above $70/b.

A weather system forming in the western Gulf of Mexico Friday was cited as a potential supporting factor for prices, but weather watchers said a storm this early in the season was highly unlikely to intensify enough to cause offshore production shutdowns, or any significant damage to onshore facilities on landfall.

The US National Hurricane Centre said the system has 40% chance of becoming a cyclone over the next 48 hours, warning of potential heavy rainfall for southeastern Texas and southwestern Louisiana.

Earlier Friday, Barclays said oil demand is largely on track and that the resurgence of Covid-19 will only cause a minor dent to the recovery.

The UK bank said it sees Brent averaging $66/b and WTI averaging $62/b in 2021.

"Extended mobility restrictions in the region might slow the demands recovery somewhat, but seem unlikely to stall it for a sustained period, given largely positive results of vaccinations programs worldwide," Barclays said in a note.

While Iran has been quick to express optimism over a constructive outcome from the talks, western diplomats have made it clear no formal agreement was made this week in Vienna.