Oil prices rise as storm approaches US Gulf Coast after week of heavy losses

Oil prices rise slightly:Oil prices rose about 1 percent on Monday on concerns that a hurricane forecast to hit Louisiana on Wednesday will disrupt production and refining along the U.S. Gulf Coast.

Brent futures rose 78 cents, or 1.1 percent, to settle at $71.84 a barrel, while U.S. West Texas Intermediate (WTI) crude gained $1.04, or 1.5 percent, to settle at $68.71.

On Friday, Brent and US diesel futures closed at their lowest prices since December 2021. WTI closed at its lowest price since June 2023 and US gasoline futures closed at their lowest level since February 2021.

In the United States, oil and gas producers along the Gulf Coast began evacuating personnel and halting drilling to prepare for Tropical Storm Francine as it battered the Gulf of Mexico.

The U.S. National Hurricane Center forecast Francine would strengthen into a hurricane on Tuesday before making landfall in Louisiana. The Gulf Coast accounts for about 50 percent of the country’s refining capacity, according to the U.S. Energy Information Administration (EIA).

“There is a small recovery in prices… inspired by hurricane warnings that could threaten the US Gulf Coast, but the broader conversation remains about where demand will come from and what OPEC+ can do,” said John Evans, an analyst at PVM.

OPEC+ includes the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia.

In OPEC member Libya, the country’s National Oil Corporation declared force majeure on several crude cargoes shipped from the port of Es Sider, and oil output was constrained by a political standoff over the central bank and oil revenues.

Oil producers OPEC+ agreed to delay a planned 180,000 barrels per day production increase for October by two months in response to falling crude prices.

Analysts said investor optimism about a soft landing scenario for the U.S. economy, in which inflation is brought under control without a recession or sharp rise in unemployment, also helped support crude prices. The U.S. government is scheduled to release a crucial inflation report later this week.

“A US recession is not inevitable, but the Federal Reserve must start cutting interest rates quickly and aggressively to avoid one,” said James Knightley, chief international economist at ING.

U.S. central bank policymakers have signaled they are ready to initiate a series of interest rate cuts at the Federal Reserve’s Sept. 17-18 policy meeting, highlighting a cooling in the labor market that could accelerate into something more severe in the absence of lower borrowing costs.

Lower rates can boost economic growth and oil demand. The Federal Reserve raised rates aggressively in 2022 and 2023 to control a surge in inflation.

Bearish forecasts

But not everyone is optimistic about crude oil prices.

Morgan Stanley cut its fourth-quarter Brent oil price forecast to $75 a barrel from $80, saying prices are likely to remain near that level unless demand weakens further.

Global commodities traders Gunvor and Trafigura said they expect oil could trade in a range between $60 and $70 a barrel due to sluggish demand from China and a persistent global supply glut.

China’s shift to low-carbon fuels and a sluggish economy are holding back oil demand growth in the world’s largest crude importer, according to speakers at the APPEC energy conference.

Refining margins in Asia have fallen to their lowest seasonal levels since 2020.

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