Oil Prices Increase on US Supply Shortage, Hurricane
Oil prices trended higher in the global commodities market as supply pressure eclipsed weak demand. Brent rose above $72 per barrel after falling to three years low. West Texas Intermediate (WTI), the American benchmark, traded at $69.67 per barrel.
Brent oil fell below $70 per barrel for the first time since December 2021 on late Tuesday. US benchmark West Texas Intermediate (WTI) declined to as low as $65.27 per barrel, the lowest level since May 2023, during the same session.
Data indicating a slowdown in economic activity in the world’s top oil consumers, the US and China, fueled market players’ demand fears and contributed to the drop in prices.
Downward price movements were influenced by the OPEC’s revision to its global oil demand growth forecast for this year and 2025. The group lowered its forecast by 80,000 bpd for this year and by 40,000 bpd for 2025.
However, prices started to rebound from the loss in early trading on Wednesday. The concern that oil production would be interrupted due to severe weather in the US, the world’s largest oil consuming country, supports the partial rise in prices.
The storm, which started in the Gulf of Mexico on Monday, turned into a ‘Category 1’ hurricane late Tuesday and quickly grew to a ‘Category 2’ storm once it reached the US coastal state of Louisiana on Wednesday, the National Hurricane Center (NHC) announced.
The Bureau of Safety and Environmental Enforcement (BSEE) announced they were monitoring offshore oil and gas operators in the Gulf of Mexico as they evacuate platforms and rigs in response to the storm.
The latest data from the Bureau of Safety and Environmental Enforcement shows that 41.74% of US Gulf of Mexico oil production has been shut in due to the storm. More than 53% of natural gas production has also been shut in.
Back to recovery line, Brent settled more than 1.9% higher on the day, leaving it within striking distance of $72/bbl. Supply disruptions from Hurricane Francine continue to provide some support.
The IEA’s monthly oil market report yesterday painted a bearish picture. The IEA estimates that global oil demand grew by just 800k b/d in the first half of the year and now expects global oil demand to grow by 900,000 barrel per day in 2024. China has been the key driver in this slower demand growth.
The IEA estimates that Chinese demand fell YoY for a fourth consecutive month in July, declining by 280k b/d. The IEA expects China’s oil demand to grow by just 180k b/d this year. The only supportive numbers in the report were inventory numbers.
The IEA estimates that oil inventories declined by 47.1m barrels in July and preliminary numbers suggest a further decline in August. US natural gas prices rallied yesterday. #Oil Prices Increase on US Supply Shortage, Hurricane
