Oil Up, Hits One-Week High

Oil surged on Monday, boosted by fears about the shutdown of output in the world’s largest producer, the United States, due to Hurricane Ida damage. However, economists predicted a steady market in the coming months.

At 0858 GMT, Brent crude was up 62 cents, or 0.9 percent, to $73.54 a barrel, while WTI crude in the United States was up 64 cents, or 0.9 percent, to $70.36.

Brent has been trading in a tight range between $70 and $74 per barrel over the last three weeks.

Oil prices may not have much room to grow in the near term, but they did not anticipate plummeting anytime soon,” broker PVM’s Stephen Brennock said. In a report last week, the US Energy Information Administration (EIA) predicted that Brent prices would remain near current levels for the rest of 2021, averaging $71 per barrel in the fourth quarter of 2021. Markets still require clarity on the virus’s long-term impact. Until we have it, it appears that most assets, including oil, may continue to drift sideways,” says Howie Lee.

Impact of Hurricane Ida

Prices are still supporting by the impact of Hurricane Ida on US output. Since late August, almost three-quarters of offshore oil production in the Gulf of Mexico, or approximately 1.4 million barrels per day, has been halted.

Hurricane Ida was exceptional in having a net bullish impact on US and global oil balances – with the effect on demand being smaller than the impact on production, Goldman Sachs analysts wrote in a note.

However, the number of rigs in operation in the United States increased in the most recent week, according to energy services firm Baker Hughes, indicating that output may increase in the coming weeks.

Opec

Aside from the impact of Ida, market attention this week will focus on anticipated modifications to the (OPEC) and International Energy Agency (IEA) oil demand forecasts as coronavirus infections continue to grow. According to two people familiar with the subject, OPEC will likely decrease its 2022 prediction on Monday.

Supply risks remain from China’s planned release of oil from strategic reserves. China said on Monday that it would release information about scheduled crude oil sales from strategic accounts in due course.

Brent oil increased 0.49 percent to $73.29 per barrel, while West Texas Intermediate (WTI) oil rose 0.56 percent to $70.11 per barrel in the United States. Two weeks after Hurricane Ida slammed the Gulf of Mexico and prompted the suspension of operations on production platforms there, energy companies have made headway in regaining oil and gas output.

According to the US Bureau of Safety and Environmental Enforcement, 883,755 barrels per day, or 48.56 percent of oil output in the Gulf of Mexico, remain sealed in. Concerns about potential supply interruptions from Libya also boosted prices.