Oil up $2 a barrel from multi-month low on US Gulf supply cuts, softer dollar

NEW YORK: Oil rose by $2 a barrel on Tuesday from a nine-month low a day earlier, supported by supply curbs in the US Gulf of Mexico ahead of Hurricane Ian and a slight softening in the US dollar.

Prices also drew support from analyst expectations of possible supply cuts from the Organization of the Petroleum Exporting Countries and allies (OPEC+), which meets to set policy on Oct. 5.

Brent crude was up $2.35, or 2.8%, to $86.41 a barrel at 10:52 a.m. EDT (1452 GMT). On Monday it fell as low as $83.65, the lowest since January. US West Texas Intermediate (WTI) crude was up $2.04, or 2.7%, at $78.74.

Crude soared after Russia invaded Ukraine in February, with Brent coming close to its all-time high of $147 in March. Recently, worries about recession, high interest rates and dollar strength have weighed.

“Oil is currently under the influence of financial forces,” said Tamas Varga of oil broker PVM. “In the meantime, relief rallies, like the one this morning caused by Hurricane Ian in the US Gulf, are viewed as temporary phenomena.” The dollar edged back from a 20-year high, which also supported oil. A strong dollar makes crude more expensive for buyers using other currencies.

Supply cuts also lent support. BP and Chevron said on Monday they had shut production at offshore platforms in the Gulf of Mexico as Hurricane Ian approached.

The outages may only provide a momentary reprieve for oil prices, Jim Ritterbusch, of Ritterbusch and Associates, said in a note.

“Outages are apt to prove brief,” Ritterbusch said, adding that the Gulf of Mexico represents “only about 15% of total US production amidst this shale age” so the effect “is apt to be minimal.” The oil price drop has raised speculation that OPEC+ could intervene. Iraq’s oil minister on Monday said the group was monitoring prices and did not want a sharp increase or a collapse.

“Only a production cut by OPEC+ can break the negative momentum in the short run,” said Giovanni Staunovo and Wayne Gordon of Swiss bank UBS.

The market is awaiting the latest US inventory reports, which analysts expect will show a 300,000-barrel increase in crude stocks. The American Petroleum Institute’s report is out on Tuesday at 4:30 p.m EDT (2030 GMT).