Oil futures settled only a few cents a barrel higher on Tuesday, with U.S. benchmark prices holding below $70, as a storm in the Gulf of Mexico looked set to miss the bulk of the region’s energy production platforms.
A recent survey showing production among members of the Organization of the Petroleum Exporting Countries at the highest level of the year so far also limited gains for oil prices.
October West Texas Intermediate crude on the New York Mercantile Exchange
the U.S. oil benchmark, rose 7 cents, or 0.1%, from Friday’s finish to settle $69.87 a barrel—well below the intraday high of $71.40. Most U.S. markets were closed Monday for the Labor Day holiday. The October contract finished the month of August with a rise of about 3.2%, according to FactSet data.
the global benchmark, settled at $78.17 a barrel, edging up by 2 cents from Monday’s finish on the ICE Futures Europe exchange.
Among the oil products, October gasoline
fell 0.1% to $1.994 a gallon, while October heating oil
added 0.5% to $2.255 a gallon.
Tropical storm Gordon was poisedto become a hurricane as it makes landfall along the U.S. Gulf of Mexico coastline later Tuesday, prompting oil producers “to take precautionary measures and shut production at offshore oil platforms,” according to Tamas Varga, an analyst at brokerage PVM Oil Associates.
The U.S. Bureau of Safety and Environmental Enforcement reported thatas of 12:30 p.m. Eastern time Tuesday,54 production platforms, which represent nearly 7.9% of all manned platforms in the Gulf of Mexico, have been evacuated because of the storm. About 9.2% of oil production and nearly 9.1% of natural-gas production in the Gulf has been shut in.
James Williams, energy economist at WTRG Economics, said that “while Gordon should hit on the Eastern edge of Gulf Coast oil production it’s impact should be minimal.”
“Some production is being shut in and many rigs will be evacuated, but the impact on output should be short-lived if Gordon follows its expected path,” he told MarketWatch. And “UnlikeHarvey a year ago, Gordon’s impact on refineries should be minimal.”
Meanwhile, Varga said global supply issues remain in focus.
“A week of violence [in Libya] between rival militias in the capital of Tripoli is also making oil bears cautious,” Varga said.
The analyst said the “main bullish catalyst” driving oil prices up in recent weeks — with Brent advancing more than 4% last month — has been Iran.
Iranian exports are already falling at a faster rate than expected, with officials at the state-run National Iranian Oil Co. provisionally expecting crude shipments to drop to around 1.5 million barrels a day in September, down from around 2.3 million barrels a day in June, according to people familiar with the matter.
President Trump’s decision in May to pull the U.S. out of a 2015 international agreement to curb Iran’s nuclear program set the stage for the reimposition of economic sanctions on the Islamic Republic, with measures directly targeting the country’s oil industry set to take effect in November.
At the same time, rising production from the Organization of the Petroleum Exporting Countries and its allies including Russia has been helping to keep a “cap on prices,” said Christyan Malek, an oil analyst at JPMorgan Chase & Co.
OPEC, whose de facto leader is Saudi Arabia, and Russia agreed in late June to begin ramping up crude production after more than a year of holding back output. ABloomberg News survey of analysts, oil companies and ship-tracking datareported Monday showed that OPEC output rose in August to 32.74 million barrels a day—the highest level this year—up 420,000 barrels a day from July.
Malek said oil market participants were looking ahead to an Algeria OPEC meeting at the end of the month for clearer signs on how prepared the Saudis and Russians are to put more barrels on the market and fill the gap left by declining Iranian exports. The Joint Ministerial Monitoring Committee, which ensures that the original output-cut agreement implemented in January 2017 between OPEC and non-OPEC producers is met, has planned its next meeting for Sept. 23.
Investors and analysts were also looking ahead to monthly reports from OPEC and the International Energy Agency next week.
Elsewhere in energy action, prices for natural gas ended sharply lower.
The storm is “not expected to cause any significant sustained disruptions to production, but could bring cooler temperatures across large areas of the country, which would weigh on cooling demand” for natural gas, said Robbie Fraser, commodity analyst at Schneider Electric. “That comes with overall production still regularly setting record highs.”
October natural gas
settled at $2.823 per million British thermal units, down 9.3 cents, or 3.2%.
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