Oil. Picture: REUTERS
Oil. Picture: REUTERS

London — Oil rose towards $46 a barrel on Wednesday, near the highest since March, lifted by US producers shutting most of their offshore Gulf of Mexico output ahead of Hurricane Laura and a report showing a drop in US crude inventories.

Renewed worries over the Covid-19 pandemic, which has squeezed demand and sent prices to record lows in April, capped gains after reports this week of patients being reinfected, raising concern about future immunity.

Brent crude rose two US cents to $45.88 a barrel by 8.15am GMT, while US. West Texas Intermediate crude fell 3 cents to $43.32. Both benchmarks settled at a five-month high on Tuesday.

“Oil traders will be preoccupied with the hurricane today,” said Tamas Varga of broker PVM. “Once the danger passes, demand considerations will come into focus again.”

The US energy industry was preparing on Tuesday for a major hurricane strike. Producers shut 1.56-million barrels per day (bpd) of crude output, representing 84% of the Gulf of Mexico's offshore production and close to the 90% outage that Hurricane Katrina brought 15 years ago.

“We do see some support on the back of hurricane activity,” Dutch bank ABN AMRO said in a report. “The threat of being infected by the Covid-19 virus threatens a further recovery in oil demand.”

Oil was also boosted on Tuesday by US and Chinese officials reaffirming their commitment to a phase 1 trade deal. Further support came from American Petroleum Institute (API) figures showing US crude stocks fell more than expected.

A record oil output cut by Opec and allies including Russia has helped to lift Brent from April’s 21-year low below $16.

The US government’s Energy Information Administration report on Wednesday afternoon will be in focus to see if it confirms the API figures. 

Reuters

Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.