Oil Prices Climb 2% as Storm Impacts US Gulf of Mexico Production, Reports Reuters

By Shariq Khan

NEW YORK – Oil prices increased by over 2% on Thursday as producers evaluated the impact on output in the U.S. Gulf of Mexico following Hurricane Francine, which affected offshore oil-producing areas before being downgraded to a tropical storm.

According to the U.S. Bureau of Safety and Environmental Enforcement, more than 730,000 barrels per day—nearly 42%—of Gulf of Mexico oil production was suspended due to the storm on Thursday.

U.S. West Texas Intermediate crude futures rose by $1.66, or 2.5%, closing at $68.97 per barrel, while benchmarks for international crude also increased, settling at $71.97 per barrel with a $1.36 gain, or 1.9%. Both contracts had climbed more than 2% on Wednesday as companies evacuated offshore platforms in response to the hurricane. Analysts from UBS projected that the disruptions might reduce Gulf oil output by approximately 50,000 barrels per day for the month.

However, some analysts warned that the effects of Francine could be temporary, as the storm weakened rapidly after making landfall in Louisiana. This could shift the oil market’s focus back to concerns over sluggish global demand, noted Alex Hodes from StoneX in a client communication.

Ports for oil and fuel exports from southern to central Texas reopened on Thursday, and refineries were beginning to increase operations.

Concerns about weak global oil demand, particularly from major importer China, have had a significant impact on prices in recent months. On Tuesday, Brent crude futures approached a three-year low after the OPEC+ producer group cut its annual demand growth forecasts for the second consecutive month.

The International Energy Agency on Thursday revised its 2024 demand growth forecast downward by over 7%, anticipating a rise of 900,000 barrels per day, due to continued weak demand in China and modest growth in other regions.

In the U.S., which is the world’s largest oil consumer, there are also indications of declining demand. Recent data from the Energy Information Administration revealed that oil inventories rose last week, driven by increased crude imports, lower exports, and reduced fuel demand.

Analysts highlighted that U.S. gasoline prices are trending toward a three-year low as a result of weak demand and ample supply, with U.S. gasoline consumption accounting for nearly 9% of global oil demand.

Market participants are closely monitoring an ongoing crisis over control of Libya’s central bank, which has led to reduced oil production and exports from the country. While a preliminary agreement was reached last week in an attempt to resolve the issue, the situation remains fluid.

Analysts at FGE reported that while Libya’s crude output is beginning to recover and export operations are resuming, a complete recovery remains uncertain.