Markets benefit from Hurricane Francine, which forced producers to evacuate platforms before it hit the coast of Louisiana
13 September 2024 - 09:08
byShariq Khan and Trixie Yap
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A general view of the newly-commissioned Dangote petroleum refinery in Ibeju-Lekki, Lagos, Nigeria. Picture: TEMILADE ADELAJA/REUTERS
New York/Singapore — Oil prices rose on Friday, extending a rally sparked by output disruptions in the US Gulf of Mexico, where Hurricane Francine forced producers to evacuate platforms before it hit the coast of Louisiana.
Brent crude futures rose by 32c, or 0.44%, to $72.29 a barrel by 6.19am GMT. US West Texas Intermediate crude futures rose by 34c, or 0.49%, to $69.31 a barrel.
If those gains hold, both benchmarks will break a streak of weekly declines, despite a rough start that saw Brent crude dip below $70 a barrel on Tuesday for the first time since late 2021. At current levels, Brent is set for a weekly increase of about 1.7%, and WTI is set to gain more than 2%.
“A previous dip to an almost three-year low called for some near-term breather to end the week, as market participants price [in] for the disruptions to short-term oil supplies caused by Hurricane Francine,” said IG market strategist Yeap Jun Rong in an email.
Oil producers assessed damage and conducted safety checks on Thursday, preparing to resume operations in the US Gulf of Mexico as estimates emerged of the loss of supply from Francine.
UBS analysts forecast output in the region in September will fall by 50,000 barrels a day (bbl/day) month on month, while FGE analysts estimated a 60,000bbl/day drop to 1.69-million barrels a day.
Official data showed nearly 42% of the region's oil output was shut-in as of Thursday.
“But if production delays were to prove to be short-lived and damages to oil platforms were to be minimal, those gains may be unwound, as the broader demand outlook continues to serve as a key headwind to limit any sustained recovery,” Yeap said.
Demand expectations remained dismal as both the oil cartel Opec and the International Energy Agency this week lowered their demand growth forecasts, citing economic struggles in China, the world’s largest oil importer.
“The recent run of weaker Chinese economic data suggests that oil demand in the world’s second largest economy may remain subdued for longer, while demand has been soft in other countries outside China as well,” said Yeap.
China’s crude oil imports averaged 3.1% lower this year from January through August compared to the same period in 2023, customs data showed on Tuesday.
“Flagging domestic oil demand in China has become a hot topic and was further underlined by disappointing August trade data,” FGE analysts said in a note to clients.
Demand concerns have grown in the US as well. US petrol and distillate futures traded at multiyear lows this week, as analysts highlighted weaker-than-expected demand in the top petroleum consuming country.
US oil and fuel stocks rose last week as demand declined sharply, data from the US Energy Information Administration showed on Wednesday.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oil gains more ground amid output disruptions
Markets benefit from Hurricane Francine, which forced producers to evacuate platforms before it hit the coast of Louisiana
New York/Singapore — Oil prices rose on Friday, extending a rally sparked by output disruptions in the US Gulf of Mexico, where Hurricane Francine forced producers to evacuate platforms before it hit the coast of Louisiana.
Brent crude futures rose by 32c, or 0.44%, to $72.29 a barrel by 6.19am GMT. US West Texas Intermediate crude futures rose by 34c, or 0.49%, to $69.31 a barrel.
If those gains hold, both benchmarks will break a streak of weekly declines, despite a rough start that saw Brent crude dip below $70 a barrel on Tuesday for the first time since late 2021. At current levels, Brent is set for a weekly increase of about 1.7%, and WTI is set to gain more than 2%.
“A previous dip to an almost three-year low called for some near-term breather to end the week, as market participants price [in] for the disruptions to short-term oil supplies caused by Hurricane Francine,” said IG market strategist Yeap Jun Rong in an email.
Oil producers assessed damage and conducted safety checks on Thursday, preparing to resume operations in the US Gulf of Mexico as estimates emerged of the loss of supply from Francine.
UBS analysts forecast output in the region in September will fall by 50,000 barrels a day (bbl/day) month on month, while FGE analysts estimated a 60,000bbl/day drop to 1.69-million barrels a day.
Official data showed nearly 42% of the region's oil output was shut-in as of Thursday.
“But if production delays were to prove to be short-lived and damages to oil platforms were to be minimal, those gains may be unwound, as the broader demand outlook continues to serve as a key headwind to limit any sustained recovery,” Yeap said.
Demand expectations remained dismal as both the oil cartel Opec and the International Energy Agency this week lowered their demand growth forecasts, citing economic struggles in China, the world’s largest oil importer.
“The recent run of weaker Chinese economic data suggests that oil demand in the world’s second largest economy may remain subdued for longer, while demand has been soft in other countries outside China as well,” said Yeap.
China’s crude oil imports averaged 3.1% lower this year from January through August compared to the same period in 2023, customs data showed on Tuesday.
“Flagging domestic oil demand in China has become a hot topic and was further underlined by disappointing August trade data,” FGE analysts said in a note to clients.
Demand concerns have grown in the US as well. US petrol and distillate futures traded at multiyear lows this week, as analysts highlighted weaker-than-expected demand in the top petroleum consuming country.
US oil and fuel stocks rose last week as demand declined sharply, data from the US Energy Information Administration showed on Wednesday.
Reuters
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