Oil rises on forecasts for higher demand and hurricane damage
Brent crude and US West Texas Intermediate hit highest levels since September 3
Singapore — Oil prices rose for a second session on Monday as concerns over US output after damage from Hurricane Ida supported the market, with expectations for higher demand.
Brent crude rose 33c, or 0.5% to $73.25 a barrel, and US West Texas Intermediate (WTI) crude also added 32c, or 0.5%, to $70.04 at 6.36am. Both markets were at their highest since September 3 earlier in the session.
About three-quarters of the offshore oil production in the US Gulf of Mexico, or about 1.4-million barrels per day, has remained halted since late August, about equal to what Opec member Nigeria produces.
“To compound matters, more oil refineries in Louisiana have resumed operations, raising demand for crude oil,” ANZ analysts said in a note.
US refiners are coming back faster than oil production from the affect of Hurricane Ida, a reverse of past storm recoveries. Most of the nine Louisiana refineries affected by the storm have restarted or were restarting on Friday.
Royal Dutch Shell, the largest oil producer in the US Gulf, on Thursday cancelled some export cargoes because of damage to offshore facilities from Hurricane Ida, signalling energy losses would continue for weeks.
However, the number of rigs in operation in the US grew in the latest week, energy service provider Baker Hughes said, indicating production may rise in coming weeks.
Beyond the affect of Ida, market attention will focus this week on potential revisions to the oil demand outlook from Opec and the International Energy Agency (IEA) as coronavirus cases continued to rise. Opec is likely to revise its 2022 forecast lower on Monday, two people familiar with the matter said.
“It looks like oil prices may continue to drift in a consolidation range for now, $70-$75 as we mentioned previously,” said Howie Lee, an economist at Singapore’s OCBC bank.
“Markets still need clarity on the virus effects beyond the very near term and until we get that, it seems like most assets, including oil, may continue to drift sideways.”
Money managers raised their net long US crude futures and options positions in the week to September 7, the US Commodity Futures Trading Commission (CFTC) said on Friday.
Supply risks remain from China’s planned release of oil from strategic reserves while the hope of fresh talks on a wider nuclear deal between Iran and the West was raised after the UN atomic watchdog reached an agreement with Iran on Sunday about the overdue servicing of monitoring equipment to keep it running.
China said on Monday it will announce details of planned crude oil sales from strategic reserves in due course.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.