Oil prices slumped on Tuesday on concerns that demand for crude oil will decline as Hurricane Ida causes power outages and flooding in Louisiana as global producers plan to ramp up production.
Prices were also depressed by weak manufacturing data from China, where factory activity grew more slowly in August than the previous month.
West Texas Intermediate (WTI) crude futures were down 5 cents, or 0.07%, to $69.16 a barrel at 0555 GMT, reversing some of Monday’s gains.
Brent crude futures for October, due to expire on Tuesday, were down 3 cents, or 0.04%, at $73.38 a barrel, after gaining nearly 1% on Monday. The more active November contract was down 3 cents, or 0.04%, at $72.20.
The market is in wait-and-watch mode to see the real supply-demand impact of Hurricane Ida. Also, market players are on hold before tomorrow’s OPEC+ review meeting.
Hurricane Ida disabled at least 94% of oil and gas production off the Gulf of Mexico. While companies are currently assessing damages, a current timeline for how long the shutdown will remain is unclear.
There has been tremendous damage to Louisiana’s power grid. Plant officials said power outages in Louisiana could last up to three weeks.
Utilities officials said general power outages could last three weeks, with the hurricane slowing efforts to repair and restart power plants, and the process could take at least two weeks.
On the supply side, about 1.72 million bpd of oil production and 2.01 million cubic feet per day of natural gas output remained offline in the U.S. side of the Gulf of Mexico following evacuations at 288 platforms.
Despite all this, the discipline of the Organization of the Petroleum Exporting Countries (OPEC) and its allies to continue their plan to add an additional 400,000 barrels per day each month until December is the key factor keeping Oil prices in check. For Brent crude oil, $70-75 per barrel seems to be a suitable range.
OPEC+ will meet on Wednesday. Delegates expect production growth to continue, but Kuwait’s oil minister said on Sunday that the plan could be reconsidered amid concerns that severe COVID-19 infections in Asia are limiting fuel demand.
