Oil futures in New York closed near $70 a barrel for the first time in nearly a month, with investors wagering that the market can absorb additional supply from OPEC+ as the U.S. Gulf grapples with Hurricane Ida’s impact.
Nearly 94% of Gulf of Mexico crude production remains shut days after the storm left the area. Prices were also supported by a weaker dollar the day after ministers from OPEC and its allies quickly ratified an output increase in October that was in line with investor expectations. Meanwhile, U.S. Secretary of Energy Jennifer Granholm authorized use of the Strategic Petroleum Reserve to conduct an exchange with an Exxon Mobil Corp. refinery in Louisiana. After the OPEC+ meeting ended without surprises, oil prices are rising as the crude stockpiles draw has raised confidence in the market, Rystad Energy’s head of oil markets Bjornar Tonhaugen wrote in a note. A weak U.S. dollar is also making commodities more inviting to investors, he added.
Crude has rallied about 40% this year as consumption bounced back from the impact of the coronavirus pandemic, although the bulk of the gains came in the first half. Against that backdrop, OPEC+ has been gradually restoring more of the supply it suspended last year when the global health crisis erupted. “Prices should be higher going into year end,” Energy Aspects head of research Amrita Sen said in a Bloomberg TV interview. High natural gas prices could boost demand for fuel oil in the winter, she said, while Hurricane Ida means “we have lost an enormous amount of hydrocarbon production.”
Most oil refineries that were hit by Hurricane Ida escaped major damage and are expected to be back online within three weeks, according to IHS Markit. Meanwhile the U.S. government reported that nationwide crude stockpiles sank 7.2 million barrels last week to the lowest level in almost two years. Total oil products supplied, a proxy for demand, hit the highest in data going back to 1990.
