Oil hits 6-week high as storm threatens US Gulf

Big demand rebound forecast by International Energy Agency also supported prices

LONDON:

Oil prices hit a six-week high on Tuesday as Hurricane Nicholas weakened into a tropical storm, bringing the threat of widespread floods and power outages to Texas and Louisiana, and as the International Energy Agency forecast a big demand rebound for the rest of the year.

Brent crude was up $0.35, or 0.5%, at $73.86 a barrel by 1222 GMT, after hitting a session high of $74.23. US West Texas Intermediate (WTI) crude climbed $0.31, or 0.4%, to $70.76 a barrel, having hit a high of $71.14.

Both contracts have risen for three consecutive sessions and were trading near their highest since early August.

Nicholas is the second major storm to threaten the US Gulf region in recent weeks. Hurricane Ida killed more than two dozen people in August.

Evacuations were underway on Monday from offshore oil platforms in the area, as onshore oil refiners prepared for Nicholas.

“The substantial production outages in the Gulf of Mexico remain one of the factors driving prices,” Commerzbank said.

About 794,000 barrels per day (bpd), or more than 40% of the US Gulf’s oil and gas output, remained offline on Monday, two weeks after Ida slammed into the Louisiana coast, according to offshore regulator Bureau of Safety and Environmental Enforcement (BSEE).

After three months of decline in global oil demand, Covid-19 vaccine rollouts are set to rekindle appetite for oil that was suppressed by pandemic restrictions, especially in Asia, the International Energy Agency said on Tuesday.

The IEA sees a 1.6-million-bpd demand rebound in October, and continuing to grow until the end of the year.

Overall, the agency lowered its 2021 global oil demand growth forecast by 105,000 bpd to 5.2 million bpd, but raised its 2022 figure by 85,000 bpd to 3.2 million bpd.

These forecasts are well below those of the Organisation of the Petroleum Exporting Countries, which sees demand growing by about 5.96 million bpd this year and 4.15 million bpd next year.

Protesters blocked an oil tanker from loading at the Libyan terminal of Es Sider on Tuesday, the National Oil Corporation (NOC) media office and an engineer at the port said.

On Tuesday, details on China’s plans to sell crude from its strategic reserves weighed on prices.

China’s state reserves administration said it would auction around 7.38 million barrels of crude on September 24, marking the first batch of sales in a rare release of strategic inventories.