Oil at one-week high as US supply concerns dominate

Oil rose on Monday, supported by concerns over shutdown in output in the United States because of damage from Hurricane Ida, with analysts expecting prices to remain range bound in a stable market over the coming months.

Brent crude was up $0.62, or 0.9%, to $73.54 a barrel at 1332 GMT and US West Texas Intermediate (WTI) crude was $0.78, or 1.1%, higher at $70.50.

Brent has held between $70 and $74 a barrel over the past three weeks.

“Oil prices may not have much room to rise in the near term, but at the same time are not expected to crash soon,” said Stephen Brennock of broker PVM.

The US Energy Information Administration (EIA) last week said it expected Brent prices to remain near current levels for the remainder of 2021, averaging $71 a barrel during the fourth quarter.

“Markets still need clarity on the virus impacts beyond the very near term; and until we get that, it seems like most assets, including oil, may continue to drift sideways,” said Howie Lee, an economist at Singapore’s OCBC bank.

The Organisation of the Petroleum Exporting Countries (OPEC) on Monday trimmed its world oil demand forecast for the last quarter of 2021, citing the Delta coronavirus variant and saying a further recovery would be partially delayed until next year.

The producer group said in a monthly report that it expects oil demand to average 99.7 million barrels per day (bpd) in the fourth quarter of 2021, down 110,000 bpd from last month’s forecast.

Prices still found some support from Hurricane Ida’s impact on US output. About three quarters of the offshore oil production in the Gulf of Mexico, or about 1.4 million bpd, has remained halted since late August.

“Hurricane Ida was unique in having a net bullish impact on US and global oil balances – with the impact on demand smaller than on production,” Goldman Sachs analysts said in a note dated September 9.

Further disruption from bad weather could be around the corner, with tropical storm Nicholas in the Gulf of Mexico expected to strengthen into a hurricane in the coming days, the US National Hurricane Centre (NHC) said.

However, the number of rigs in operation in the United States grew in the latest week, energy service provider Baker Hughes said, indicating production could rise in coming weeks.

A supply boost could also come from China’s planned release of oil from strategic reserves, while the hope of fresh talks on a wider nuclear deal between Iran and the West was raised after the United Nations atomic watchdog reached an agreement with Iran on Sunday about the overdue servicing of monitoring equipment to keep it running.

Meanwhile, two attacks carried out at an oilfield run by majority state-owned Colombian oil company Ecopetrol caused a fire and a spill of crude onto vegetation but no injuries, the company said. La Cira Infantas field produces around 30,000 bpd of crude.