Oil closed above $70 a barrel for the first time in nearly six weeks as another heavy storm heads to the U.S. Gulf of Mexico, while producers are still reeling from Hurricane Ida.

Futures in New York settled 1.1% higher. Tropical Storm Nicholas, which may reach hurricane strength before it makes landfall, is expected to bring flooding rains to Houston, as well as parts of Louisiana still recovering from Hurricane Ida two weeks ago. About 44% of oil supply is down in the Gulf and the volume of shut-in output may start growing once again. Shell has already began removing some staff from one of its platforms to prepare for the storm. Refineries and terminals Texas could also see some curtailments, given the storm’s coastal track. “The threat of more disruptions from extreme weather is also a cause of concern for producers and a reason for traders to add price premiums, as the new Tropical Storm Nicholas in the Gulf of Mexico could turn into a hurricane and hit Texas in coming days,” said Nishant Bhushan, an oil markets analyst for industry consultant Rystad Energy.

With crude prices steadily climbing higher this month, major Wall Street banks are assessing the crude market. Goldman Sachs Group Inc. said oil will likely lead a rally in commodities next quarter amid strong demand and “growing scarcity” of supply. Bank of America Corp. said a colder-than-expected winter could push prices up toward $100 at some point early next year.

Meanwhile, OPEC on Monday forecast stronger demand for its crude this year and next amid rising global fuel use and output disruptions from the North Sea to the U.S. The group’s monthly report indicated that the world will continue to face a supply deficit in coming months even as OPEC nations revive idle production. “The broader global oil-demand picture is showing signs of normalizing,” said Stephen Brennock, an analyst at brokerage PVM Oil Associates. “As OPEC+ is firmly in control of supply, and maintaining its cautious stance, the crude market should continue to tighten further in the year-end period.”

Traders are also awaiting additional import quotas for China’s private refiners, which could spur renewed purchases in the physical market in the coming weeks. One company was granted permission to import a set volume of crude last week, and quotas for other refiners are expected imminently.

Separately, the Energy Information Administration sees more gains in tight oil production from the U.S. Combined, major shale regions should add 66,000 barrels a day to produce 8.135 million barrel a day, but remain short of pre-pandemic highs.

Oil fell by the most in nearly three weeks after China decided to tap its crude reserves to ease a surge in energy costs. Futures declined 1.7% in New York on Thursday, following the latest step by the world’s largest importer of raw materials to quell a commodities rally. Oil prices briefly rose earlier in the session after a U.S. government report showed crude stockpiles fell as production tumbled the most on record last week due to disruptions by Hurricane Ida. “Additional supply coming from the Chinese SPR — reducing the need to import more oil in the near term — has weighed on prices,” said Giovanni Staunovo, a commodity analyst at UBS Group. In recent days, U.S. benchmark crude has fluctuated near $69 a barrel, with investors weighing the impact of domestic supply disruptions against uncertainty over demand as the pandemic continues to rage.

China’s move to release oil from its strategic reserves, its most dramatic intervention yet in the oil market, primarily targets domestic refining and chemical firms. It follows similar action the government has already taken in several other commodities markets and adds pressure to oil prices. In a late statement on Thursday, the National Food and Strategic Reserves Administration said the country had tapped its giant oil reserves to “to ease the pressure of rising raw material prices.” A sustained decline in prices demonstrates the market thinks China will keep using their strategic reserves to drive prices down, according to Phil Flynn, senior market analyst at Price Futures Group.

As of Thursday, nearly three-fourths of U.S. Gulf of Mexico oil output was still offline after Hurricane Ida hit Louisiana, marking a slower comeback than in the wake of Katrina in 2005. The ripple effects in the market were apparent in the EIA report. Gasoline stockpiles fell by more than 7 million barrels last week, while crude production slid by 1.5 million barrels a day. Crude inventories dropped 1.53 million barrels.

Have a Great Day,

Oil advanced amid a slow return of U.S. production after Hurricane Ida hit south-east Louisiana. Futures in New York climbed 1.4% to top $69 a barrel on Wednesday. More than a week after the Category 4 storm made landfall, about 77% of U.S. Gulf of Mexico offshore oil output remains shut-in, according to the Bureau of Safety and Environmental Enforcement. The resulting disruption has seen the value of regional grades such as Mars Blend reach the highest since January. A prolonged shutdown in offshore output could also lead to an increase in Russian crude imports into the U.S.  Most in the industry were expecting Gulf of Mexico production to return faster than refining, but now “it seems that it may be the other way around,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Management.

Benchmark U.S. oil futures have held close to $69 a barrel so far this month in the wake of pockets of robust consumption emerging in some regions including Europe, though the fast-spreading delta variant of the coronavirus has resulted in renewed lockdowns in other areas. China, the world’s largest oil importer, has managed to contain its latest outbreak and there are expectations that the market will tighten in coming months. Meanwhile, a fresh wave of protests at key Libyan oilfields and ports threatens to derail stability in the OPEC member’s production and exports. But its impact on the supply-demand balance may not be as acute as in the past. “There is a lot of spare capacity now around the world that can substitute for Libyan supply,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management.

Oil closed lower for a second session as the dollar rose, offsetting bullish Chinese trade data and continued production outages in the U.S. Gulf of Mexico. Futures in New York fell 1.4% with a stronger dollar making commodities priced in the currency less attractive. Meanwhile, the industry was still assessing the impact on oil assets from Hurricane Ida. Nearly 80% of crude oil production in the U.S. Gulf of Mexico remains offline. WTI is basically getting thumbed down by the rising U.S. dollar,” said Bart Melek, head of commodity strategy at TD Securites. Fears of slower-than-expected economic growth due to the delta-variant of the coronavirus and the impending Federal Reservce’s asset tapering later in 2021 may be prompting a pull back in risk appetite, he added.

The fast-spreading delta variant has raised demand concerns in recent weeks, though China was able to swiftly contain its latest outbreak. The Asian country’s overall imports also rose, with crude purchases climbing to a five-month high, pointing to a revival in the region’s biggest economy following a recent wave of Covid-19 infections.

There are expectations that the global oil market will tighten over the rest of 2021, with the Organization of Petroleum Exporting Countries and its allies deciding last week to keep boosting supply on a bet that the recovery will accelerate.

Post-Ida recovery efforts are still continuing with the storm’s initial impact to oil greater than any other storm in history. Royal Dutch Shell Plc said it’s returning staff to its Auger and Enchilada/Salsa oil and natural gas platforms in the Gulf though those assets and others remain shut. Prices for regional sour crude benchmark Mars Blend surged to a seven-month high due to supply uncertainty.

Among Louisiana refiners, Exxon-Mobile Corp. and Marathon Petroleum Corp. said parts of their respective crude processing plants were back in service.

Oil in New York posted its second weekly gain as the impact of Hurricane Ida continues to snarl U.S. oil production, though prices edged lower Friday following a weak U.S. jobs report. West Texas Intermediate futures capped a gain 0.8% for the week despite shedding 1% Friday. The deceleration in hiring reflects growing fears of the delta variant of Covid-19 and complicates a potential decision by the Federal Reserve to begin scaling back stimulus. Traders exiting positions ahead of the long weekend in the U.S. and Canada also exerted some downward pressure on prices Friday afternoon.  “At this point, Ida storm has been quite supportive for oil due to the production disruptions. But as the region recovers and shuttered capacity slowly returns, Ida will be less and less of a supporting factor,” said Bart Melek, head of commodity strategy at TD Securities. Longer term, it will be all about OPEC+, and the delta-variant coronavirus impact on demand, he added.

Oil climbed this week as the market appears set to remain in deficit even as the Organization of Petroleum Exporting Countries and its allies push ahead with reviving supply. OPEC+ has said crude stockpiles in developed countries are falling and an economic recovery is accelerating. There have been signs of revival in Asia, where Covid-19 infections had surged. China’s independent refiners are buying more crude and gasoline consumption in India is improving. The return of Iranian supply, meanwhile, looks even further away.  “Oil prices continue to trade at relatively elevated levels despite OPEC+ reaffirming plans to normalize output and Covid-19 demand woes still present,” said Jens Pedersen, senior analyst at Danske Bank.

Exxon Mobil Corp. is tapping the U.S. Strategic Petroleum Reserve with more than 90% of the Gulf of Mexico’s oil production still shut as of Friday afternoon, while Louisiana’s refineries are still reeling from the impact of the storm.

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.

OPEC and its allies agreed to stick to their existing plan for gradual monthly oil-production increases after a brief video conference. Ministers ratified the 400,000 barrel-a-day supply hike scheduled for October after less than an hour of talks, one of the quickest meetings in recent memory and a stark contrast to the drawn out negotiations seen in July. “OPEC have proven once again that they can meet and do things seamlessly,” Christyan Malek, head of oil and gas and JPMorgan Chase & Co., said on Bloomberg TV. “It’s likely that harmony is going to be utilized” to respond flexibly to any further shifts in the market over the coming year, he said.

While conditions may appear favorable for cartel right now, there are uncertainties on the horizon. Even as demand recovers, it has been buffeted by the emergence of new coronavirus variants. The question of whether Iran and the U.S. will do a deal to lift sanctions on the Islamic Republic’s oil exports — currently looking less likely — also hangs over the market. The Organization of Petroleum Exporting Countries and allies including Russia are in the process of rolling back the unprecedented output cuts implemented at the depths of the Covid-19 crisis last year. About 45% of the idle supply has already been revived, and in July the group laid out a plan for gradually returning the remainder through to September 2022.

Separately, the Organization of Petroleum Exporting Countries and its allies will meet Wednesday to assess the global market and prospects for demand as the pandemic grinds on. The alliance forecasts a supply deficit this year, even as it continues to add production. A surplus is expected to return in 2022.

Some affected Louisiana refiners are also using their Texas plants to deliver barrels owed to customers, according to people familiar with matter. Fuel stocks in the U.S. Gulf are flush because gasoline demand this year is below normal. Currently gasoline inventories are above the 10-year average, based on U.S. government data.

Oil has endured a turbulent August, rising and falling on alternate weeks, as investors reacted to the latest twists in the global health crisis and swings in the dollar. U.S. benchmark crude slumped this month despite a steady draw in stockpiles, and some nations have managed to control virus outbreaks driven by the delta variant. There are “some pre-OPEC+ jitters and the realization that Hurricane Ida has a short-term negative impact on demand, while supply should not be impacted,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S.

Energy companies affected by Ida have moved to restore operations. Colonial Pipeline Co. said Tuesday that it resumed service on two of its key conduits that send fuel from the Gulf Coast to the Northeast. The industry-funded American Petroleum Institude reported that national crude inventories fell over 4 million barrels, according to people familiar with the data. The group also reported an increase in gasoline stocks and a decline in diesel supply. If the U.S. government confirms Wednesday, the rise in gasoline stockpiles would be the largest since June.

Data in Asia continues to show the impact of the delta variant virus outbreak in recent months. On Tuesday China’s official manufacturing purchasing managers’ index fell to 50.1 from 50.4 in July, slightly lower than the median estimate in a Bloomberg survey of economists. That suggests Beijing’s curbs on mobility to check the spread of the delta variant may have affected the pace of growth. Meanwhile, Japan’s oil demand in July was down about 8% from 2019 levels, according to Bloomberg calculations from government data.

Have a Great Day,

Oil closed modestly higher Monday in New York as offshore explorers assess damage from Hurricane Ida and investors shift focus to an OPEC+ meeting that could see more supply added to the market.

U.S. oil futures settled above $69 a barrel for the first time in over two weeks after falling as much as 1.6% earlier. Gulf of Mexico producers had shut in about 1.7 million barrels a day of crude output ahead of the storm but most of these assets are expected to resume service steadily. In contrast, refineries in Louisiana may be slower to bring back operations.  “The market is regarding the impact on crude production as minimal at this point from Ida unlike refining,” said Bart Melek, head of global commodity strategy at TD Securities. “This means less demand for feed as refiners have a reduced capacity, which could see crude scarcity worries go away.”

Gasoline futures ended 1.7% higher after rallying over 4% earlier. About 2.11 million barrels a day of refining capacity –about  12% of the U.S. total — was being shut or brought to reduced rates at plants along the Mississippi River on Sunday. Both crude oil and gasoline have been hit by volatile trading this month as investors weighed the challenge to consumption posed by the resurgence of the pandemic in parts of Asia, the U.S. and Europe. Meanwhile, the Organization of Petroleum Exporting Countries and its partners will meet later this week and are expected to go ahead with an increase in output.

Hurricane Ida pummeled New Orleans and the Louisiana coast overnight with lashing rain and ferocious gusts, leaving much of the region without electricity and bracing for widespread floods. The storm drove a wall of water inland when it thundered ashore Sunday as a Category 4 hurricane and reversed the course of part of the Mississippi River. After Ida passed the Gulf, a flyover by the U.S. Coast Guard on Sunday afternoon showed Royal Dutch Shell Plc-operated Mars, Olympus and Ursa crude and natural gas platforms remained on location. “We expect a more rapid return of oil production than refining production in the region,” Goldman Sachs Group Inc. analysts wrote in a note Monday. It’s too early to determine how long refineries in the region will remain shut, they said.

Gasoline prices in the southeast U.S. could climb in the coming weeks if refineries suffer extensive damage or can’t get power and are forced to stay shut for an extended period, adding to the price inflation hitting Americans. Spot prices for physical gasoline in Houston rose to almost a four-year premium over futures in New York. Traders in Europe have already been preparing to fill any gap in supplies at New York Harbor, provisionally chartering tankers.

Colonial Pipeline Co., the operator of the largest U.S. fuel-distribution system from the refining centers in Texas and Louisiana to customers across the eastern U.S., idled its main network.  “For a Category 4, you could be looking at four to six weeks or more of downtime for the refineries,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.  Ida, which came ashore about 60 miles (97 kilometers) south of New Orleans, drove up ocean levels as much as 16 feet (4.9 meters). The hurricane’s 150-mile-per-hour winds tie Louisiana’s record set by Laura in 2020 and a 19th century storm.