Crude oil prices rose to a five-month high on Tuesday as US producers shut most offshore output in the Gulf of Mexico ahead of Hurricane Laura even as rising coronavirus cases in Asia and Europe capped gains.
Brent futures LCOc1 rose 73 cents, or 1.6 percent, to settle at US$45.86 a barrel, while US West Texas Intermediate (WTI) crude CLc1 rose 73 cents, or 1.7 percent, to settle at $43.35.
That was the highest closes for both benchmarks since March 5, the day before Saudi Arabia and Russia failed to agree on a new plan to cut output and about a week before the World Health Organization declared COVID-19 a pandemic.
US producers cut crude output ahead of Hurricane Laura at a rate approaching the level of 2005’s Hurricane Katrina and also halted most oil refining along the Texas/Louisiana coast.
Laura is expected to strengthen into a major hurricane with 115 mile per hour (185 kph) winds before it strikes the coast near the Texas-Louisiana border early Thursday, according to the US National Hurricane Center.
On Tuesday, producers had evacuated 310 offshore facilities and shut 1.56 million barrels per day (bpd) of crude output, 84 percent of Gulf of Mexico’s offshore production, near the 90 percent outage that Katrina brought 15 years ago.
“Today’s strength was again almost entirely attributable to storm concerns,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, noting the storm factor would likely overshadow the weekly storage report from the US Energy Information Administration (EIA).
Analysts forecast US crude stockpiles fell for a fifth week in a row last week, according to a Reuters poll conducted ahead of reports from the American Petroleum Institute (API) at 4: 30 p.m. (2030 GMT) on Tuesday and the government on Wednesday.
“Overall, hurricanes may be limiting supply this week … but the market will soon again focus on the biggest hurricane of them all, COVID-19,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
Europe is seeing a rise in coronavirus cases, including re-infection. Two re-infections were reported in Europe and one in Hong Kong.
Elsewhere, US and Chinese trade officials reaffirmed their commitment to a Phase 1 trade deal.
