Crude Oil Rallies Above $70 as Another Hurricane Menaces Texas - BLOOMBERG
(Bloomberg) -- Oil rose for a third day as investors tracked another hurricane menacing a key U.S. energy hub just weeks after Ida hammered local output.
West Texas Intermediate gained 0.8% after capping the highest close since early August on Monday. The latest system, Nicholas, made landfall in Texas, bringing torrential rain that threatens to unleash flooding in Houston and parts of Louisiana still recovering from Ida’s blow two weeks ago. The storm was upgraded to a hurricane only hours before crossing the coast.
See also: Texas Energy Nexus Braces for Latest Tropical Weather Blow
Crude’s rally has been reinvigorated in recent weeks as extreme weather in the U.S. blunted supply, and investors tracked signs that demand is recovering from the Covid-19 pandemic. Local oil production has yet to be fully restored more than two weeks after Ida’s passage, and Goldman Sachs Group Inc. estimates the lost output may eventually total about 40 million barrels.
In an indication of the tightening market, global inventories that ballooned during the pandemic have shrunk back to the lowest level in 20 months. About 2.97 billion barrels of crude were stored onshore globally as of Sept. 5, the least since January 2020, according to data analytics firm Kayrros.
“Supply issues are keeping prices supported at present at a time when stockpiles in the U.S. and also on a global scale look increasingly tight,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore. “Even if Tropical Storm Nicholas comes and goes without a hitch, oil traders will likely look over their shoulders nervously for further supply stresses.”
There’s also been extreme weather in Asia. All operations at China’s Zhoushan and Ningbo ports remained shut as of Tuesday morning after Typhoon Chanthu. The two locations are home to major refineries and oil-storage facilities.
The Organization of Petroleum Exporting Countries on Monday forecast stronger demand for its crude this year and next amid rising global fuel use and output disruptions. The group’s monthly report indicated that the world will continue to face a deficit in the coming months even as OPEC nations revive production.
Brent’s prompt timespread was 61 cents a barrel in backwardation. That’s a bullish pattern, with near-dated prices above later-dated ones, and is in line with 63 cents a week ago.