UnderTheRadar wrote: U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Wednesday as investors attempt to claw back this week’s earlier losses.
A few of the weaker shorts are covering their positions after reports showed U.S. Gulf of Mexico oil producers made slow progress in rebuilding output. Nonetheless, gains are being capped by a stronger U.S. Dollar which could reduce foreign demand for the dollar-denominated asset. Buyers are also reluctant to add to positions amid worries about the impact on demand of rising coronavirus infections.
US Oil Losses from Hurricane Ida Rank among Worst in 16 Years
Hurricane Ida’s damage to U.S. offshore energy production makes it one of the most costly since back-to-back storms in 2005 cut output for months, according to the latest data and historical records, Reuters reported.
Ida’s 150 mile-per hour (240 kph) winds cut most offshore oil and gas production for more than a week and damaged platforms and onshore support facilities. About 79% of the region’s offshore oil production remains shut and 79 production platforms are unoccupied after the storm made landfall on August 29.
Some 17.5 million barrels of oil have been lost to the market to date, with shutdowns expected to continue for weeks. Ida could reduce total U.S. production by as much as 30 million barrels this year, according to energy analysts.
Offshore U.S. Gulf of Mexico wells produce about 1.8 million barrels of oil per day, 16% of the daily U.S. total.
Renewed Concerns over Weakening Global Recovery Limiting Gains
Worries over demand in Asia were ignited by Saudi Arabia’s decision to cut the price for all crude grades sold to the continent by at least $1 a barrel. Disappointing U.S. jobs data on Friday also indicated the economic recovery may be stalling amid a resurgence in COVID-19 infections. On a positive note, China’s crude oil imports rose 8% in August from a month earlier.
“Given that OPEC+ is continuing its plan to raise production monthly, despite weak data from China and the U.S. raising slowdown fears and Saudi Arabia looking for market share in the region, oil is likely to remain under pressure,” said Jeffrey Halley, senior market analysts for Asia Pacific at brokerage firm OANDA.
Daily Forecast
Traders will be closely watching inventory data from the American Petroleum Institute (API) group due on Wednesday and the U.S. Energy Information Administration (EIA) on Thursday for a clearer picture of the storm’s impact on crude production and refinery output.
Analysts polled by Reuters expect, on average, that crude stocks fell by 3.8 million barrels in the week to September 3, and see gasoline stocks down by 3.6 million barrels and distillates down by 3 million barrels.