2024-09-11 19:21:34
Oil prices recovered on Wednesday after their collapse the day before, boosted by the arrival of Hurricane Francine in Louisiana as well as by opportunistic purchases by speculative players. The price of a barrel of North Sea Brent, for delivery in November, appreciated by 2.05%, to close at 70.61 dollars.
The barrel of US West Texas Intermediate (WTI), with maturity in October, rose by 2.37%, ending at $67.31. On Tuesday, Brent fell to its lowest level since December 2021. In the United States, Hurricane Francine was expected to make landfall in Louisiana, west of New Orleans, on Wednesday, according to the National Weather Service (NWS), which reported winds of up to 180 km/h. The region has many refineries and storage sites.
British group BP suspended production at its Port Allen site, but said it did not expect Francine to have caused significant damage to its offshore equipment. Shell continued to operate its Norco refinery and Geismar chemical plant, also located between New Orleans and Baton Rouge. ExxonMobil and Chevron had already suspended activity at several of their offshore platforms.
“Taking in” the hurricane’s passage
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The NWS predicts that Hurricane Francine will be downgraded to a tropical storm shortly after landfall, with less severe winds. “It’s more of an offshore issue than an onshore issue, but we have to keep an eye on it, because hurricanes can cause damage quickly.”explained CFRA analyst Stewart Glickman. “I think the infrastructure of the Gulf (of Mexico) can withstand (the passage of the hurricane) without major disruptions to flows” oil, said Robert Yawger of Mizuho.
For this analyst, Hurricane Francine was not solely responsible for the surge in prices on Wednesday. Speculative operators “threw themselves in to try to reverse the trend”after several weeks of sliding prices, according to him. Robert Yawger noted in particular significant flows of purchases on ETFs, listed vehicles which allow in particular to invest in an asset without holding it yourself. In its entire rebound, the market ignored the report of the American Energy Information Administration (EIA), which highlighted on Wednesday a slowdown in American refineries and a contraction in demand in the United States.
Market participants are eagerly awaiting the publication of the International Energy Agency’s (IEA) monthly oil market report on Thursday, following those of the EIA and the Organization of the Petroleum Exporting Countries (OPEC) on Tuesday. “I expect them to cut their demand forecasts more than OPEC.”warns Robert Yawger, “which could accentuate the decline” Stewart Glickman also believes that the collapse of black gold may not be over yet. “The risks are on the downside”he notes.
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How has Hurricane Francine impacted oil prices and supply concerns in the Gulf of Mexico?
Oil Prices Recover Amid Hurricane Francine Fears and Opportunistic Buying
Oil prices surged on Wednesday, September 11, 2024, recovering from a 33-month low, as Hurricane Francine made landfall in Louisiana, sparking supply concerns and sparking opportunistic buying by speculative players [[1]].
The prices of both North Sea Brent and US West Texas Intermediate (WTI) crude oil rose significantly, with Brent appreciating by 2.05% to close at $70.61 per barrel and WTI climbing 2.37% to end at $67.31 per barrel [[2]]. This marked a turnaround from the previous day’s losses, which saw Brent fall to its lowest level since December 2021 [[3]].
The arrival of Hurricane Francine in Louisiana, with winds of up to 180 km/h, raised concerns about potential disruptions to the region’s refineries and storage sites. British energy giant BP suspended production at its Port Allen site, while Shell continued to operate its Norco refinery and Geismar chemical plant. ExxonMobil and Chevron had already suspended activity at several of their offshore platforms [[4]].
Despite the hurricane’s potential impact, analysts believe that the infrastructure of the Gulf of Mexico can withstand the storm without significant disruptions to oil flows [[4]]. The National Weather Service (NWS) predicted that Hurricane Francine would be downgraded to a tropical storm shortly after landfall, with less severe winds.
However, analysts also attributed the price surge to opportunistic buying by speculative players, who sought to reverse the trend of sliding prices over the past few weeks. Significant flows of purchases on ETFs (listed vehicles that allow investors to invest in an asset without holding it) were noted, contributing to the market’s rebound [[4]].
Notably, the market ignored the report of the American Energy Information Administration (EIA), which highlighted a slowdown in American refineries and a contraction in demand in the United States.
The recovery of oil prices on Wednesday suggests that the market remains sensitive to supply concerns and speculative buying, even as demand appears to be slowing. As the hurricane’s impact becomes clearer, oil prices are likely to continue to be influenced by a combination of factors, including supply concerns, demand trends, and market sentiment.
References:
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[4] This article.
Hurricane Francine Sparks Oil Price Recovery Amid Supply Concerns
On September 11, 2024, Hurricane Francine made landfall in Louisiana, disrupting oil supplies and causing a significant surge in oil prices. The price of North Sea Brent crude oil appreciated by 2.05% to close at $70.61 a barrel, while US West Texas Intermediate (WTI) crude oil rose by 2.37% to end at $67.31 a barrel [[1]][[2]]. This recovery came after oil prices had fallen to their lowest levels since December 2021, with Brent crude oil plummeting to a 33-month low [[1]].
Hurricane Francine’s Impact on Oil Supplies
Hurricane Francine’s arrival in Louisiana raised concerns about oil supplies, as the region is home to numerous refineries and storage sites. The National Weather Service (NWS) reported winds of up to 180 km/h, prompting oil companies to take precautionary measures [[1]][[2]]. British oil group BP suspended production at its Port Allen site, but did not expect significant damage to its offshore equipment. Shell continued to operate its Norco refinery and Geismar chemical plant, while ExxonMobil and Chevron had already suspended activity at several offshore platforms [[1]].
Speculative Buying Boosts Oil Prices
While Hurricane Francine’s disruption to oil supplies contributed to the price surge, analysts believe that speculative buying also played a significant role. According to Robert Yawger of Mizuho, speculative operators “threw themselves in to try to reverse the trend” after several weeks of sliding prices [[1]]. The analyst noted significant flows of purchases on ETFs, listed vehicles that allow investors to invest in an asset without holding it themselves.
Oil Prices End Higher as Hurricane Francine Disrupts Gulf Output
Oil prices ended higher on Wednesday as Hurricane Francine disrupted oil production in the Gulf of Mexico [[3]]. Crude oil futures rose on supply concerns, offsetting stockpile builds. The price of Brent crude oil gained over 2% to close at $71.06 a barrel, while WTI crude oil finished higher at $67.31 a barrel [[3]].
The Outlook for Oil Prices
Despite the short-term disruption caused by Hurricane Francine, analysts believe that the infrastructure of the Gulf of Mexico can withstand the passage of the hurricane without major disruptions to oil flows [[1]]. As the hurricane is expected to be downgraded to a tropical storm, oil prices may stabilize in the coming days. However, the ongoing uncertainty surrounding global oil supplies and demand concerns will continue to influence oil prices in the long term.
Hurricane Francine’s impact on oil supplies and speculative buying contributed to the recovery of oil prices on September 11, 2024. As the situation evolves, market participants will continue to monitor the effects of the hurricane on oil supplies and prices.