Oil Prices Rise Amid Hurricane Shutdown Fears

By Erwin Seba

HOUSTON (Reuters) – Oil prices climbed more than 2% on Wednesday, driven by fears of lengthy production shutdowns in the U.S. offshore oil patch due to Hurricane Francine, which was approaching landfall in Louisiana.

Brent crude futures settled at $70.61 a barrel, up $1.42, or 2.05%, while U.S. crude futures finished up $1.56 a barrel, or 2.37%, at $67.31.

Despite an increase in crude inventories reported by the U.S. Energy Information Administration (EIA), oil prices rose. Crude inventories rose by 833,000 barrels to 419.1 million barrels in the week ending Sept. 6, less than analysts’ expectations for a 987,000-barrel increase. Meanwhile, crude stocks at the Cushing, Oklahoma delivery hub fell by 1.7 million barrels.

“A rather unexciting minor build to crude inventories has been overshadowed by yet one more draw at Cushing,” said Matt Smith, lead oil analyst for Kpler. “EIA data show Cushing inventories now drawing nine of the last 10 weeks, down to the lowest level since early November last year.”

Both oil benchmarks saw a drop on Tuesday, with Brent falling below $70 to its lowest since December 2021, and U.S. crude hitting its lowest since May 2023. This drop followed OPEC’s revision of its 2024 oil demand growth forecast for a second time.

Concerns about Hurricane Francine disrupting U.S. output— the world’s biggest producer— also supported prices. “Next week, I suspect the statistics will be impacted by Hurricane Francine interrupting tanker flow through the Gulf of Mexico,” said Andrew Lipow, president of Lipow Oil Associates.

The U.S. Bureau of Safety and Environmental Enforcement reported that 39% of crude oil production in the Gulf of Mexico was shut down by Wednesday as companies evacuated crews. Additionally, 49% of natural gas production from the Gulf was also impacted by the storm.

The U.S.-regulated northern Gulf of Mexico accounts for 15% of total U.S. crude oil production and 2% of dry natural gas production, according to the EIA.