Oil prices saw a gain of over 1% on Thursday, driven by concerns about Hurricane Francine potentially disrupting oil production in the US Despite this uptick, fears of lower demand limited further increases.
Brent crude futures for November were up by $1, or 1.4%, reaching $71.61 per barrel as of 0632 GMT. Similarly, US crude futures for October rose by 92 cents, or 1.4%, to $68.23 per barrel.
The rise follows a more than 2% increase in both Brent and US crude prices during the previous session. This boost was attributed to the shutdown of offshore platforms in the Gulf of Mexico and disruptions to refinery operations due to Hurricane Francine’s landfall in southern Louisiana on Wednesday. Priyanka Sachdeva, a senior market analyst at Phillip Nova, noted that these disruptions could tighten oil supplies temporarily, given that the Gulf region accounts for about 15% of US oil production.
However, the storm’s impact is expected to diminish as it dissipates, leading market attention to shift back to concerns about weaker demand. According to the Energy Information Administration (EIA), US oil stockpiles increased last week due to higher crude imports and lower exports. Additionally, gasoline demand fell to its lowest level since May, while distillate fuel demand also decreased, and refinery runs were down.
Despite the short-term supply concerns, analysts suggest a bearish medium-term outlook for oil prices. Kelvin Wong, a senior market analyst at OANDA, indicated that weak demand from China and concerns about US economic growth contribute to this negative trend. The Organization of the Petroleum Exporting Countries (OPEC) has also revised its global oil demand growth forecast for 2024 downward, marking its second consecutive downward revision.
The market’s response to the hurricane and ongoing economic uncertainties highlights a complex dynamic where supply disruptions are weighed against concerns of diminished demand. Colin Cieszynski, chief market strategist at SIA Wealth Management, observed that the modest increase in oil prices despite the hurricane reflects broader concerns about economic slowdown and its potential impact on oil demand.
In related news, the International Energy Agency (IEA) is expected to release its monthly market report later today, which may offer further insights into future demand trends. Additionally, the Federal Reserve’s anticipated interest rate cuts and broader market movements are being closely watched by investors.
Bloomberg, Reuters, and Market Watch contributed to this report.
