© Reuters.nvesting.com - Crude prices rose more than 1% Tuesday for their first meaningful rally in two weeks as Hurricane Idali threatened to strike at the heart of oil production and power generation in the U.S. Gulf of Mexico.
Idalia skirted past its originally-thought destination Cuba and headed towards Florida's Gulf Coast, where it was expected to slam ashore on Wednesday, disrupting crude output and causing electricity outages. More than 20 counties in western and Central Florida have already issued evacuation orders.
New York-traded West Texas Intermediate, or WTI, crude settled up $1.06, or 1.3%, at $81.16. The benchmark finished last week down 1.8%, after shedding 2.3% the week prior. Before that, it rose for seven weeks in a row in a rally inspired by Saudi-Russian production cuts that lifted WTI by nearly 20%.
London-traded settled up $1.07, or 1.3%, at $85.49 per barrel. Brent fell 0.4% last week, adding to the previous week’s 2.3% drop. Before that, the global crude benchmark also rose for seven weeks in a row, rising by a total of 18%.
Concerns over slowing growth in China, the world’s largest buyer, have kept crude prices boxed at between $80 and $85 over the past month.
Idalia threatens supply disruptions
But the risk of storms hitting the U.S. Gulf Coast of Mexico could change that, analysts said.
“The market is now vulnerable to spikes on the back of surprise outages and hurricane-related issues in the US,” said Craig Erlam, analyst at online trading platform OANDA.
“On the supply side, major producers appear committed to ensuring the market remains tight and prices higher. They had little success earlier in the summer but that is no longer the case.”
U.S. oil major Chevron (NYSE:) evacuated staff from three Gulf of Mexico oil production platforms ahead of the hurricane, wire reports said.
Supply concerns were also heightened by a fire at a Marathon Petroleum (NYSE:) refinery last week after a chemical leak ignited two giant storage tanks filled with naphtha.
On Monday, Marathon said it planned to restart units at the 596,000-barrel-per-day refinery in Garyville, Louisiana, the third-largest in the United States.
U.S. oil drillers were also cutting the number of rigs actively pulling crude out of the ground, indicating that production could further slow in coming months as the “supply squeeze is becoming more painfully obvious" said Phil Flynn, analyst at online trading platform OANDA.
But John Kilduff, partner at New York energy hedge fund Again Capital pointed to the three-year highs in crude production estimated back-to-back over the past three weeks by the U.S. Energy Information Administration.
“The missing words here are ‘production efficiency’, which has grown by leaps and bounds in the U.S. oil industry,” said Kilduff. “This industry is pretty dexterous when it comes to meeting demand. We will have adequate oil, I believe, despite the storms and that should prevent prices from getting out of hand because of the storms.”
U.S. data deluge throughout week
Some traders maintain a somewhat outlook for oil this week ahead of an abundance of economic data that could influence the Federal Reserve at its next decision on U.S. interest rates on Sept. 20.
U.S. job openings slowed their most in 2-½ years and plunged as well.
A second reading on second-quarter U.S. growth is due on Wednesday, while readings on - the Fed’s preferred inflation gauge - are due on Thursday, and August data are expected on Friday.
FedChair on Friday said a week ago that the U.S. central bank may need to raise rates further to cool stubborn inflation, which would potentially hit economic activity in the world’s largest economy, weighing on demand for crude.
U.S. oil inventories awaited
Market participants were also on the lookout Tuesday for U.S. weekly oil inventory data, due after market settlement from API, or the American Petroleum Institute.
The API will release at approximately 16:30 ET (21:30 GMT) a snapshot of closing balances on U.S. crude, gasoline and distillates for the week ended Aug. 25. The numbers serve as a precursor to official inventory data on the same due from the U.S. Energy Information Administration on Wednesday.
For last week, analysts tracked by Investing.com expect the EIA to report a drop of 2.921 million barrels, versus the 6.135M-barrel reduction reported during the week to Aug. 18.
On the front, the consensus was for a build of 1.234M over the 1.467M increase in the previous week. Automotive fuel gasoline is the No. 1 U.S. fuel product.
With , the expectation is for a climb of 0.045M barrels versus the prior week’s gain of 0.945M. Distillates are refined into , diesel for trucks, buses, trains and ships and fuel for jets.
(Peter Nurse and Ambar Warrick contributed to this item.)
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Oil prices edge higher as Idalia nears Florida coast By Investing.com - Investing.com
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