Oil Prices Surge Amid Hurricane Francine Threat

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, as Hurricane Francine approached Louisiana.

Brent crude futures settled at $70.61 a barrel, up $1.42, or 2.05%. Meanwhile, U.S. crude futures increased by $1.56, or 2.37%, finishing at $67.31.

Oil prices managed to ignore a rise in crude oil inventories reported by the U.S. Energy Information Administration (EIA).

According to the EIA, crude inventories rose by 833,000 barrels to 419.1 million barrels for the week ending Sept. 6, falling short of analysts’ expectations for a 987,000-barrel rise. Crude stocks at the Cushing, Oklahoma, delivery hub decreased by 1.7 million barrels that week.

A relatively minor increase in crude inventories has been overshadowed by a notable draw at Cushing, noted Matt Smith, lead oil analyst for Kpler. EIA data shows Cushing inventories have drawn down in nine of the last 10 weeks, reaching the lowest levels since early November last year.

Both oil benchmarks suffered a setback on Tuesday, with Brent dropping below $70 for the first time since December 2021 and U.S. crude hitting its lowest since May 2023 after OPEC revised its 2024 oil demand growth forecast downward for the second time.

Additionally, concerns regarding Hurricane Francine disrupting U.S. oil output helped support prices, analysts claimed.

Expect next week’s statistics to be affected 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 from the storm’s path. Furthermore, 49% of natural gas production from the Gulf was halted due to the storm.

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