Oil prices extend gains on US supply concerns

Crude oil prices extended gains earlier in the week as a significant portion of US production capacity in the Gulf of Mexico remained shut in the wake of Hurricane Francine.

An additional driver for oil prices came from traders expecting inventory declines in the week to September 13. The American Petroleum Institute reports estimated inventory later today, and the EIA issues its report on Wednesday.

According to a Reuters poll, crude stocks may have lost about 200,000 bpd in the reporting period.

Platforms are also being reopened, but 12 percent of oil production capacity and 16 percent of gas production capacity are still shut, Reuters reported today. That’s still down from about 20 percent of oil capacity and 28 percent of natural gas capacity as of Sunday.

Francine’s disruption to oil and gas production in the Gulf of Mexico pushed oil prices higher last week, and the boost appears to have lasted longer than expected, especially in light of reports that bearish bets on oil have reached an all-time high recently. week.

“This historic speculative selling pressure caused crude oil prices to collapse by more than $10/bbl between late August and last Tuesday,” Commodity Context analyst Rory Johnston wrote in a note cited by Reuters.

However, supply disruptions in the US Gulf of Mexico and expectations that the Fed will announce a long-awaited interest rate cut later this week appear to have reversed sentiment, at least temporarily. That pushed Brent crude above $73 a barrel earlier today, with West Texas Intermediate topping $70 a barrel.

“Rising expectations of an aggressive interest rate cut boosted sentiment in the commodities complex,” ANZ analysts were quoted as saying by Reuters.

Crude oil prices have fallen about 14 percent since the start of the third quarter, mainly due to weaker-than-expected economic data from top importer China.

By Irina Slav for Oilprice.com

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