By Adedapo Adesanya
Oil prices climbed more than 2 per cent on Wednesday, driven by fears of lengthy production shutdowns in the United States, with Brent crude futures growing by $1.42 or 2.05 per cent to $70.61 per barrel and the West Texas Intermediate (WTI) increasing by $1.56 or 2.37 per cent to $67.31 a barrel.
Both oil benchmarks tanked on Tuesday, with Brent falling below $70, its lowest price since December 2021 and the US crude dropping to its lowest since May 2023 after the Organisation of the Oil Producing Countries (OPEC) revised down its 2024 oil demand growth forecast for a second time.
Market analysts noted that concern about Hurricane Francine disrupting output in the US, the world’s biggest producer, lent support to the appreciation in prices.
About 39 per cent of crude oil production in the Gulf of Mexico was shut on Wednesday as companies evacuated crews out of Francine’s path while 49 per cent of natural gas production from the Gulf was shut by the storm, the US government said.
On Monday, Chevron, Exxon Mobil, and Shell announced workers at offshore rigs in the storm’s path were being evacuated and drilling activities suspended.
The US-regulated northern Gulf of Mexico accounts for 15 per cent of total US crude oil production and 2 per cent of dry natural gas production, according to the Energy Information Administration (EIA).
Prices shook off an increase in crude inventories reported by the agency on Wednesday.
Crude inventories rose by 833,000 barrels to 419.1 million barrels in the week ending September 6, the EIA said.
Meanwhile, falling energy prices have helped ease headline inflation in the US as the Consumer Price Index (CPI) rose 2.5 per cent over the prior year in August, a considerable drop from July’s 2.9 per cent.
This helps strengthen the case for interest rate easing in the US, which is expected to happen this month.
The ongoing political standoff between rival governments in Libya has seen its crude oil exports plunge to 194,000 barrels per day last week, an 81 per cent slide compared to the previous week.
Libya’s National Oil Corporation (NOC) has cancelled some cargoes, although it has not declared force majeure on all exports from the country.