Oil prices gain as storm shuts US output, progress in Covid-19 treatment

Crude oil prices rose on Monday as storms closed in on the Gulf of Mexico, shutting more than half its oil production, and on signs of progress in development of a Covid-19 treatment.

Brent crude was up 32 cents, or 0.7 per cent, at $44.67 a barrel by 0753 GMT. US West Texas Intermediate crude rose 31 cents, or 0.7 per cent, to $42.65.

"Prices are taking their cues from Mother Nature this morning as two storms bear down on the Gulf of Mexico. Half of the region's production has been shut down, though gains will be limited by the threat of a second prolonged Covid wave," said Stephen Brennock of oil broker PVM.

Energy companies shut more than 1 million barrels per day (bpd) of offshore crude oil production in the US Gulf of Mexico because of the twin threat from Hurricane Marco and Tropical Storm Laura. Workers have been evacuated from more than 100 production platforms.

"While there is a focus on oil production at the moment, we will need to keep an eye on refining activity, which is vulnerable to flooding. The US Gulf is a key refining hub," said Warren Patterson, ING's head of commodities strategy.

Also supporting prices was a report by the Financial Times that US President Donald Trump is considering fast-tracking an experimental Covid-19 vaccine being developed by AstraZeneca and Oxford University.

On Sunday Trump also hailed FDA authorization of a coronavirus treatment that uses blood plasma from recovered patients, a day after he accused the agency of impeding the rollout of vaccines and therapeutics for political reasons.

Oil price gains were kept in check, however, by an increase in the US oil and natural rig count for the first time since March, with the addition of the most oil rigs in seven months as shale producers resume drilling.