Oil rises as storm closes US production, inventories drop

Oil prices rose for a second day on Wednesday as a hurricane closed U.S. offshore oil and gas production and an industry report showed a decrease in U.S. crude inventories.

Brent crude rose 60 cents, or 1.5%, to $41.13 a barrel by 0518 GMT, while U.S. crude rose 68 cents, or 1.8%, to $38.96. Both contracts rose by more than 2% on Tuesday.

More than 25% of U.S. offshore oil and gas output was shut and export ports were closed on Tuesday as Hurricane Sally sat just off the U.S. Gulf Coast.

“Our current estimate for the total outage associated with the Sally weather system is between 3 million and 6 million barrels of oil over approximately 11 days,” Rystad Energy said in a note.

That is likely to help reduce stockpiles although refineries were also shut down, cutting demand for oil. U.S. crude oil inventories fell by 9.5 million barrels last week, although gasoline inventories increased, data from industry group the American Petroleum Institute (API) showed on Tuesday.

Analysts had expected oil stocks to increase by 1.3 million barrels. Official data on U.S. stockpiles is due out later on Wednesday and often conflicts with the industry figures.

“If we see a number similar to the ... drawdown the API reported overnight, it would likely provide some immediate support to the market,” ING Research said.

However, oil producers and traders are painting a bleak picture for a recovery in global fuel demand as the COVID-19 pandemic rages on, hammering economies.