Oil rises to one-week high on US supply concerns
Oil prices rose in the second session on Monday amid concerns about the production shutdown in the US, the world's largest producer, after Hurricane Ida's damage and higher demand expectations.
Both benchmarks were at their highest levels since Sept. 3 earlier in the session.Brent crude rose 67 cents, or 0.9%, to $73.59 a barrel at 0633 GMT, and West Texas Intermediate (WTI) crude rose 66 cents, or 1%, to $70.38 a barrel.
About three-quarters of US offshore oil production in the Gulf of Mexico, or about 1.4 million barrels per day, has been deactive since late August. The amount is roughly equivalent to what OPEC member Nigeria produces.
U.S. refineries are recovering from the impact of Hurricane Ida faster than oil production, unlike past storm recoveries. Most of the nine Louisiana refineries affected by the storm had already began production, and the rest began on Friday.
Hurricane Ida was unique in having a net upward impact on US and global oil balances. Demand expectations increased while supply curtailed. It has caused US oil inventories to decrease by about 30 million barrels and increases US refinery margins. And could further widen the price gap between WTI and Brent.
Royal Dutch Shell Plc, the largest oil producer in the US Gulf, on Thursday canceled some export cargoes due to Hurricane Ida's damage to its offshore facilities, signaling that energy losses will continue for weeks.
Energy service provider Baker Hughes stated that the number of drilling rigs operating in the US has increased in the last week, and that production may increase in the coming weeks.
As coronavirus cases continue to rise, market attention will focus this week on possible revisions to the oil demand outlook by the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA). Presumably, the 2022 forecasts will be revised lower on Monday.
Oil prices are currently drifting in a consolidation range between $70-75 and it is very likely to continue.
Markets need clarity on the effects of the virus beyond the near term, and until it happens, most assets, including oil, are likely to be flat.
Money managers raised their net long U.S. crude futures and options positions in the week to Sept. 7, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.
As supply risks from China's planned release of oil from strategic reserves persist, hopes for new talks between Iran and the West on a broader nuclear deal have risen.
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