Crude oil prices extended gains made at the start of the week as a significant portion of U.S. production capacity in the Gulf of Mexico remained shut-in, following Hurricane Francine. An additional driver for oil prices came from traders expecting inventory declines over the week to September 13. The American Petroleum Institute reports inventory estimated later today and the EIA releases its report on Wednesday. Per a Reuters poll, crude oil inventories could have shed some 200,000 bpd in the reporting period. Platforms and being reopened but 12% of oil production capacity and 16% of gas production capacity are still shut, Reuters reported earlier today. That’s still down from about 20% of oil capacity and 28% of natural gas capacity as of Sunday. The disruption caused by Francine on Gulf of Mexico oil and gas production pushed oil prices higher last week and the boost appears to have endured longer than one might expect, especially in light of reports that bearish bets on oil hit an all-time high also last week.
“This historic speculative selling pressure prompted a more than $10/bbl collapse in crude prices between late August and this past Tuesday,” Commodity Context analyst Rory Johnston wrote in a note cited by Reuters.
NN:
OPEC production will drop even more on top of present cuts:
Other Analysts Look at Oil Price Rise
Rebecca Babin, a senior equity trader for CIBC Private Wealth in New York said Crude is trading higher today due to ongoing disruption in Libyan oil flows, as the UN was unable to reach an agreement over the weekend. That’s what, adding that, “with bearish market positioning, there is limited supply to cover shorts, further supporting the rally”.
Brian Leisen, a Global Oil Analyst at RBC Capital Markets, said he doesn’t think there is anything fundamental driving price action today. “A lot of the focus since Friday and over the weekend has been on positioning and trade flows, which have been extremely negative,” he said. “Seeing a bounce in spot prices today is more of a function of being sold down so heavily this month,” he added. “From a physical perspective we’ve seen mixed reactions from the recent sell off, with some grades still having trouble finding a bid, but there have been green shoots for some grades now pricing competitively enough to get a positive reaction from traders, indicating a near term fundamental floor for crude prices,” Leisen went on to state.
Rania Gule, a Senior Market Analyst at XS.com. In a market comment on September 12,, said oil prices will continue to experience significant volatility in the near term. “The ongoing strength of the U.S. dollar, disruptions from natural factors such as tropical storms, and geopolitical tensions and production interruptions in key countries all contribute to market instability,” Gule said in the comment. “However, a sharp collapse in prices seems unlikely, especially if OPEC continues to adjust production in line with global demand,” Gule added. “The big question remains how the market will respond to forthcoming geopolitical and economic events, and whether major economies will face sharp slowdowns affecting global oil demand,” Gule continued.
The U.S. Energy Information Administration (EIA) reduced its Brent and WTI spot price forecasts for 2024 and 2025 in its latest short term energy outlook (STEO), which was released recently. According to its September STEO, the EIA now sees the Brent spot price averaging $82.80 per barrel this year and $84.09 per barrel next year and the WTI spot price averaging $78.80 per barrel in 2024 and $79.63 per barrel in 2025.