Picture: REUTERS
Picture: REUTERS

London — Oil prices steadied on Tuesday as a resumption of output in the Gulf of Mexico after Hurricane Barry and a boom in US supply due to shale oil countered tensions in the Middle East.

Prices remained under pressure as data on Monday showed that second-quarter economic growth in China slowed to 6.2% from a year earlier, the weakest pace in at least 27 years.

Brent crude futures were up 4c at $66.52 a barrel by 8.52am GMT. The international benchmark lost 24c, or 0.4%, on Monday. West Texas Intermediate (WTI) crude futures rose by 1c to $59.59 a barrel. The US benchmark fell about 1% in the previous session.

On Monday, US oil companies began restoring some of the nearly 74% of production that was shut at Gulf of Mexico platforms ahead of Hurricane Barry.

“Crude oil is having a quiet day today after giving back some of last week’s gains,” Saxo Bank commodity strategist Ole Hansen said. “US. output from the Gulf looks set to increase and ... Barry failed to hit refinery assets along the coast.”

Workers were returning to the more than 280 production platforms that had been evacuated. However, it could still take several days for full production to resume. “You could almost hear the big sigh of relief from oil producers and refiners in the region as the storm passed without causing significant damage,” PVM analyst Tamas Varga said.

The market was also weighed down by signs of further increases in output from the US, which has ridden a wave of shale oil production to become the world’s biggest crude producer, ahead of Russia and Saudi Arabia.

US oil output from seven major shale formations is expected to rise by about 49,000 barrels per day (bpd) in August, to a record 8.55-million bpd, the US Energy Information Administration (EIA) said.

Rising US output will undermine efforts by Russia and Saudi Arabia to reduce global oil inventories by convincing suppliers in the oil cartel Opec and outside Opec to cut production. The expanded group, known as Opec+, agreed this month to extend production cuts for another nine months.

Market activity has started to slow, as it tends to do in July and August, the peak European and US holiday season, Hansen said.

Tension between the US and Iran over Tehran’s nuclear programme kept the market nervous given the potential for a price spike should the situation deteriorate. Said Varga: “The Iranian tension ... still makes any oil bear careful.” 

Reuters