NEW YORK: Oil prices edged up about 1% on Monday after falling to multi-month lows last week on concerns a hurricane forecast to hit Louisiana this week could disrupt production and refining along the U.S. Gulf Coast.
Brent futures rose 57 cents, or 0.8%, to $71.63 a barrel by 12:22 p.m. EDT (1622 GMT), while U.S. West Texas Intermediate (WTI) crude rose 78 cents, or 1.2%, to $68.45.
Despite the small price increase, Brent futures remained in technically oversold territory for a fifth day in a row for the first time since May 2024.
On Friday, Brent and U.S. diesel futures closed at their lowest since December 2021. WTI closed at its lowest since June 2023 and U.S. gasoline futures closed at their lowest since February 2021.
In the Gulf of Mexico, the U.S. National Hurricane Center projected Tropical Storm Francine will strengthen into a hurricane on Tuesday before hitting the Louisiana coast on Wednesday. The U.S. Gulf Coast accounts for about 60% of the country’s refining capacity.
“A small recovery in prices is under way … inspired by hurricane warnings that might threaten the U.S. Gulf Coast, but the wider conversation remains on where demand will come from and what OPEC+ can do,” said PVM analyst John Evans.
OPEC+ includes the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia.
In Libya, an OPEC member, the country’s National Oil Corp declared force majeure on several crude cargoes loading from the Es Sider port, with oil production curtailed by a political standoff over the central bank and oil revenue.
The OPEC+ oil producer group has agreed to delay a planned output increase of 180,000 barrels per day for October by two months in reaction to tumbling crude prices.
Analysts said investor optimism about a soft landing scenario for the U.S. economy ahead of a crucial inflation report later in the week also helped support crude prices.
Federal Reserve policymakers have signaled they are ready to kick off a series of interest rate cuts at the U.S. central bank’s meeting in two weeks, noting a cooling in the labor market that could accelerate into something more dire in the absence of a policy shift.
Lower rates can boost economic growth and demand for oil. The Fed hiked rates aggressively in 2022 and 2023 to tame a surge in inflation, but is widely expected to reduce borrowing costs at its Sept. 17-18 policy meeting.
BEARISH FORECASTS
But not everyone was bullish about crude prices.
Morgan Stanley cut its fourth quarter price forecast for Brent to $75 a barrel from $80, noting that prices were likely to remain around that level unless demand weakens further.
Global commodity traders Gunvor and Trafigura anticipate oil prices may range between $60 and $70 per barrel due to sluggish demand from China and persistent global oversupply.
The weakness in Chinese demand is driven by an economic slowdown and growing shift towards lower-carbon fuels, said speakers at the APPEC energy industry event.
Refining margins in Asia have slipped to their lowest seasonal levels since 2020.
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