US producers stopped most offshore production in the Gulf of Mexico before Hurricane Laura. Rising coronavirus cases in Asia and Europe continue to limit earnings. Crude oil prices rose to a five-month high on Tuesday.
Brent futures LCOc1 rose 73 cents, or 1.6%, to settle at $45.86 a barrel, while West Texas Intermediate (WTI) crude CLc1 rose 73 cents, or 1.7%, to settle at $43.35.
Laura is expected to turn into a major hurricane with 115 mph (185 kph) wind before hitting the beach near the Texas-Louisiana border early Thursday. US producers cut crude oil production at a rate approaching the level of Hurricane Katrina in 2005 before Hurricane Laura, and also stopped most of the oil refining operations along the Texas / Louisiana coast. They evacuated 310 offshore facilities and stopped producing 1.56 million barrels of crude oil per day, 84% of the Gulf of Mexico’s offshore production, close to the 90% cut that Katrina brought about 15 years ago.
The strength of the prices can almost entirely be attributed to the storm concerns, which will likely overshadow the weekly storage report figures.
Analysts estimate that US crude inventories fell for the fifth consecutive week last week.
Overall, hurricanes may be limiting supply this week, but markets will soon focus on COVID-19, which is still the worst hurricane effect of all.
Europe is seeing an increase in coronavirus cases with the new wave of infections. Two people in Europe and one in Hong Kong were reported as reinfected despite they had already passed the disease.
US and Chinese trade officials reaffirmed their commitment to the Phase 1 trade agreement.