Oil prices improved on Wednesday following a U.S. industry report that showed crude inventories dropped more than anticipated last week. This steadied following overnight losses from the influence of Hurricane Ida on U.S. refineries.
Prices surged ahead of the OPEC+ conference at 1500 GMT. The Organization of the Petroleum Exporting Countries (OPEC) and Russia and partners should continue to plan to connect 400,000 barrels per day (bpd) every month throughout December.
For October, Brent crude futures increased 45 cents, or 0.6%, to reach $72.08 per barrel by 0651 GMT, while U.S. West Texas Intermediate (WTI) crude futures stood at $68.95 a barrel, up 45 cents, or 0.6%.
Avtar Sandu, a senior commodities trader at Phillips Futures, stated that Tuesday’s report from the American Petroleum Institute (API) presented a bigger-than-expected decline in U.S. crude inventories, bullish, and expanding prices.
As stated by two market sources, U.S. crude stocks dropped by 4 million barrels for the week closed on Aug. 27, quoting API figures on Tuesday.
Ahead of the weekly Energy Information Administration report expected at 10:30 a.m. EDT (1430 GMT) on Wednesday, a Reuters survey of analysts expected crude stocks would lose 3.1 million barrels. [EIA/S]
Nevertheless, U.S. crude prices should be resting under stress. Offshore oil and gas generation in the Gulf of Mexico is continuously recovering. However, refinery operations will possibly take longer to recover to normal, analysts stated.
Hurricane Ida shutting capacities
A sum of 2.3 million bpd of refining capacity, or 13% of U.S. capacity, was closed in Louisiana because of Hurricane Ida, the U.S. Department of Energy calculated. At the same time, about 94% of oil and natural gas production was delayed in the U.S. part of the Gulf of Mexico.
Power blackouts are likely to decrease the reopening of the processing factories. However, Exxon Mobil (NYSE: XOM)’s 520,000 bpd Baton Rouge system was planning to restart on Tuesday.
Head of oil markets at Rystad Energy, Bjornar Tonhaugen, said in a note that they perceive a risk that the loss of U.S. refinery demand will be more significant and more extended than the loss of crude supply, adding that it could count on WTI prices through September.
Notwithstanding an anticipated swift return of U.S. crude production, OPEC+ assumes the market to be in deficit at least until the close of 2021, OPEC+ sources stated.
ANZ Research analysts said that this should give comfort to the group. They can now continue with their programmed monthly 400,000 bpd rise in output.