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Monday, July 22, 2024

Oil moves higher as storm threatens U.S. Gulf Coast

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Oil prices rose on Monday as a tropical storm in the Gulf of Mexico prompted drillers to evacuate rigs and shut-in production.

Although gains were muted by concerns about excess global supplies and falling fuel demand.

U.S. West Texas Intermediate (WTI) crude futures were trading up 14 cents or 0.4 per cent at $37.47 a barrel by around 0629 GMT.

Brent crude was six cents or 0.2 per cent higher at $39.89 a barrel.

Both contracts ended last week lower, falling for a second week in a row.

Tropical Storm Sally gained in strength in the Gulf of Mexico west of Florida on Sunday and was poised to become a category 2 hurricane.

The storm is disrupting oil production for the second time in less than a month after hurricane Laura swept through the region.

Typically oil rises when production is shut down, but with the coronavirus pandemic getting worse demand concerns are to the fore, while global supplies continue to rise.

The U.S. is the world’s biggest oil consumer and producer.

In Libya, Commander Khalifa Haftar committed to ending a months-long blockade of oil facilities, a move that would add more supplies to the market, although it was unclear if oil fields and ports would begin operations.

“The announcement that the blockade of Libyan oil export terminals may be about to end will add to the woes of OPEC+’s meeting this week,’’ said Jeffrey Halley, senior market analyst at OANDA.

The Organisation of the Petroleum Exporting Countries (OPEC) and allies, a grouping known as OPEC+, meets on Sept. 17 to discuss compliance with deep cuts in production, although analysts don’t expect further reductions to be made.

“Given the more recent sell-off in the market, there will likely be more pressure on certain producers to improve their compliance,’’ ING Economics said in a note.

BP Plc and Equinor ASA evacuated staff from some offshore platforms on Sunday after similar moves by Chevron Corp and Murphy Oil Corp the day before.

Also supporting prices, drillers cut the number of oil and gas rigs for the first time in four weeks last week.

Demand globally for oil used in the transport sectors is unlikely to return to pre-pandemic levels until the fourth quarter of next year, Vitol’s Chief Executive Officer, Russell Hardy, said on Monday at the virtual Asia Pacific Petroleum Conference.

The forecast excluded jet fuel. (Reuters/NAN)

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