Oil reaches 6-week high on fears over storm Nicholas in US
More than 40% of the US Gulf's oil and gas production is still off after Ida. US industry is preparing for another storm as it struggles to return to normal production levels after Hurricane Ida wreaked havoc on the Gulf Coast.
Oil prices hit a six-week high on Tuesday on concerns that another storm could affect production in Texas this week.
Oil prices rose for the third day in a row as Brent crude hit its highest level since August 2 at the start of the session.
Brent crude which rose as high as $74.08 earlier, up 40 cents, or 0.5% to $73.91 a barrel at 0444 GTM.
West Texas Intermediate (WTI) crude, which previously rose as high as $71.05, also rose 45 cents, or 0.6%, to $70.90 a barrel, the highest since Aug.
On Monday, Brent rose 0.8% and WTI rose 1.1%.
On Monday, Re-discharges from offshore US Gulf of Mexico oil platforms began as onshore oil refineries begin to prepare for Tropical Storm Nicholas, which is moving with 70 mph (113 km/h) winds towards the Texas coast and threatening coastal Texas and Louisiana.
As investors try to figure out how long crude oil production will be affected by Ida, there are concerns that Nicholas will cause further disruptions to the Gulf Coast.
According to the offshore regulator, Bureau of Safety and Environmental Enforcement (BSEE), more than 40% of the U.S. Gulf's oil and gas production went offline for two weeks after it reached the Louisiana coast of Ida.
Concerns over the oil cut in Libya were another factor supporting the price hikes. Loading operations at Libya's Es Sider and Ras Lanuf oil terminals resumed Friday after a one-day shutdown, National Oil Corp (NOC) said. However, an engineer stated that the Hariga port is still closed by protesters.
The sale of oil from the US and China Strategic Petroleum Reserves, planned to support the falling oil supply, is depressing the sentiment.
The US government has approved the sale of crude oil from the country's strategic oil reserves to eight companies, including Exxon Mobil and Chevron, as part of a planned auction to raise money for the federal budget.
Traders noted that China's planned release of oil from strategic oil reserves (SPRs) could increase available resources in the world's second-largest oil consumer.
Hopes for new talks between Iran and the West on a broader nuclear deal have risen after the United Nations atomic watchdog reached an agreement with Tehran on Sunday.
Considering all these developments, the rise in oil prices is likely to be short-lived. The market's upside may be limited by the supply-disrupting impact of the hurricanes, the planned outflow of oil from strategic reserves in the US and China to help stabilize supply, the resumption of Iran's oil exports, and the waning US summer driving season.
US shale oil production will hit the highest level since April 2020 in October. Adding to price pressures, the seven major shale formations will increase US oil production by about 66,000 bpd in October to 8.1 million bpd, according to the Energy Information Administration's monthly drilling efficiency report. And this is the highest level since April 2020.
Meanwhile, the Organization of Petroleum Exporting Countries (OPEC) lowered its forecast for world oil demand for the last quarter of 2021 due to the Delta coronavirus variant, raising its 2022 forecast to 4.15 million barrels per day compared to 3.28 million barrels last month.
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