Oil prices rebounded on Wednesday after US crude inventories fell more-than-expected last week and stabilized after overnight losses from Hurricane Ida’s impact on US refineries.
Prices rose ahead of the OPEC+ meeting at 1500 GMT today, when the Organization of the Petroleum Exporting Countries (OPEC), Russia and its allies are expected to stick to a plan to increase production by 400,000 barrels per day (bpd) per month through December.
Brent crude futures for November rose 49 cents, or 0.7 percent, to $72.12 as of 0414 GMT, while West Texas Intermediate (WTI) crude futures for October rose 50 cents, or 0.7 percent, to $69.00 a barrel.
The American Petroleum Institute’s (API) report on Tuesday showed a larger-than-expected drop in US crude inventories supported prices. U.S. crude inventories fell by 4 million barrels in the week ended Aug. 27, data show.
The official weekly Energy Information Administration (EIA) report, which will be released Wednesday at 1430 GMT, will provide more clarity.
By contrast, US crude prices are expected to remain under pressure as offshore oil and gas production in the Gulf of Mexico gradually recovers, although it will likely take longer for refinery operations to return to normal.
According to estimates from the US Department of Energy, a total of 2.3 million barrels of refining capacity, or 13% of US capacity, was shut down in Louisiana due to Hurricane Ida. At the same time, about 94% of oil and gas production on the US side of the Gulf of Mexico was suspended.
Power outages are likely to slow reopening of the petroleum processing plants, but Exxon Mobil’s 520,000 bpd Baton Rouge complex is prepared to restart on Tuesday.
There is a risk that the loss of US refinery demand will be larger and longer-lasting than the loss of raw supply, and this is likely to support WTI prices throughout September, sources say.
Despite an expected swift return of U.S. crude production, OPEC+ expects the market to be in deficit at least until the end of 2021, OPEC+ sources say. This will give the group some relief to continue with the planned production increase of 400,000 barrels per month.
