Oil rose for a third day as investors reacted to another hurricane threatening a key U.S. energy center just weeks after Ida cut local production significantly.
West Texas Intermediate rose 0.9 percent after recording its highest close since early August on Monday. The last hurricane, Nicholas, reached land in Texas, carrying torrential rain that threatened to trigger floods in Houston and parts of Louisiana that are still recovering from Ida’s attack two weeks ago. The storm was “upgraded” to a hurricane just hours before it crossed the coast.
The International Energy Agency said in a report Tuesday that the world will have to wait until October for additional oil supplies as losses from Ida’s production erase the increase from OPEC +. Global supplies fell 540,000 barrels a day in August due to unexpected disruptions and will remain flat this month, the IEA said.
The rise in crude oil has intensified in recent weeks as extreme weather in the United States has reduced supply and investors have seen signs that demand is recovering from the Covid-19 pandemic. Local oil production has not yet fully recovered more than two weeks after Ida’s transition, and according to Goldman Sachs Group Inc. the lost yield could eventually reach about 40 million barrels.
As an indication of a shrinking market, global stocks, which rose during the pandemic, shrank to a 20-month low. About 2.97 billion barrels of crude oil were stored ashore worldwide by September 5, at least since January 2020.
Supply issues maintain price levels as stocks in the United States, as well as globally, appear to be narrowing. Even if the tropical storm Nicholas does not cause significant damage, the attention of traders and investors will be focused on further supply tensions.
There was also extreme weather in Asia. All operations in the Chinese ports of Joshan and Ningbo have been closed since Tuesday morning after Typhoon Chantu. Large refineries and oil storage facilities are located at these two locations.
OPEC + on Monday forecasts higher demand for black gold this and next year amid rising global fuel consumption and disruptions in production. The organization’s monthly report shows that the world will continue to face deficits in the coming months, even as OPEC + countries revive production.
Charts: With permission of Bloomberg Inc.
Junior Trader Nikolay Petrov