Oil prices were in a holding pattern on Thursday as a massive storm in the Gulf of Mexico raced towards the heart of the U.S. oil industry, forcing oil rigs and refineries to shut, with little impact expected on supply as oil stockpiles remain high.
FILE PHOTO: Pump jacks operate at sunset in Midland, Texas U.S. February 11, 2019. REUTERS/Nick Oxford/File PhotoU.S. West Texas Intermediate (WTI) crude CLc1 futures fell 4 cents, or 0.1%, to $43.35 a barrel by 0148 GMT, erasing Wednesday’s slight rise.
Brent crude LCOc1 futures for October, which expire on Friday, inched up 5 cents to $45.69 a barrel after falling 22 cents, or 0.5%, on Wednesday. The more active November Brent contract LCOc2 rose 2 cents to $46.18.
The threat from Hurricane Laura pushed the market higher earlier in the week, but the storm is not expected to affect supplies much because oil and product inventories remain high due to the coronavirus pandemic’s hit to fuel demand.
“It really depends on the damage sustained. But there’s a huge mitigation in that (crude) stockpile levels are at their highest in decades,” said Vivek Dhar, a commodities analyst at Commonwealth Bank.
U.S. crude inventories stood at 507.8 million barrels at the end of the week to Aug. 21, even after a larger-than-expected drop of 4.7 million barrels.
Laura intensified on Wednesday and is now forecast to bring heavy rains and catastrophic, 150 mile-per-hour (240 kph) winds that will drive ocean waters up to 40 miles (64 km) inland, the U.S. National Hurricane Center said.
“It’s certainly packing a punch,” said National Australia Bank’s head of commodity research, Lachlan Shaw.
He said the market has not rallied hard on the storm threat as demand is less than usual and inventories are much higher than normal.
The hurricane is expected to make landfall at about midnight (0500 GMT Thursday).
Oil producers on Tuesday shut 1.56 million barrels per day (bpd) of crude output, or 84% of the Gulf of Mexico’s production, evacuating 310 offshore facilities.
Nine refineries that convert nearly 2.9 million bpd of oil into fuel, or about 15% of U.S. processing capacity, were also shutting down.