Oil launched amid a slow resumption of U.S. production reduced by Hurricane Ida more than a week ago.
Futures in New York ended 1.4% higher on Wednesday. The Bureau of Safety and Environmental Enforcement stated that around 77% of U.S. Gulf of Mexico crude production continues shut-in nine days following Ida made landfall in southeast Louisiana. The cost of regional grades such as Mars Blend touched the highest after January, and a continued shutdown could spark an improvement in shipments of Russian crude to American ports.
Many spectators had expected offshore wells would respond to service forward of onshore oil refineries. Still, it appears that it may be the other way around, stated Rebecca Babin, a senior energy trader at CIBC Private Wealth Management.
A lot of additional capacity replacing Libyan supply
Benchmark U.S. oil futures have been near to $69 per barrel so far this month in the wake of occasional demand developments in Europe and elsewhere. However, the fast-spreading coronavirus delta variant has triggered resumed lockdowns in some countries.
Meantime, a further wave of demonstrations at key Libyan oilfields and ports alerts to derail OPEC members’ production and exports. But its influence on the supply-demand balance may not be as acute as in the past.
Rob Haworth, the senior investment strategist at U.S. Bank Wealth Management, stated that there is a lot of additional capacity around the world that can replace Libyan supply.
After Ida, continuous oil-production outages in the U.S. Gulf could end up benefiting an industry that was suffering from delta’s spread affecting demand. Babin said it could work as an equalizer to balance markets and support crude pricing as we exit a seasonally strong season.
Traders will get a snapshot on Thursday of Hurricane Ida’s influence on U.S. stockpiles from the government. According to people familiar with the matter, the American Petroleum Institute evaluated that inventories declined by almost 3 million barrels. The industry group also estimated overall fuel inventories declined by more than 10 million barrels. Gasoline alone apparently fell by around 3.3 million barrels last week, as stated by a Bloomberg survey.