September 13, 2021, | AtoZ Markets–Oil prices soared to a six-week high, despite OPEC cutting its global oil demand forecast for the last quarter of 2021 due to the Delta coronavirus variant. Read here about oil production and Hurricane Ida’s impact.
Weather conditions in the United States have had a strong impact on the evolution of oil prices these days. Due to the weather, some of the oil platforms in the Gulf of Mexico had to be evacuated, and this has lowered U.S. production.
The price of a barrel of Brent crude oil traded today at $ 73.73, an increase of approximately + $ 0.81 versus the previous price. Meanwhile, the price of a barrel of WTI crude oil traded today at $70.80, +1.08 versus the previous closing price for October 2021 delivery on the NYSE.
That puts Brent on track for its highest close since July 30 and WTI at its highest close since Aug. 3.
Although OPEC said a stronger recovery in oil demand would be delayed until next year, when consumption will exceed pre-pandemic rates, analysts noted that OPEC and its allies were continuing to increase production.
Factors That Have Been Affecting the Price
In addition to the OPEC demand forecast, other factors have been affecting the oil price:
- Planned oil releases from strategic reserves in the United States and China
- The possibility that Iran is closer to selling oil to the world again
Investors have pointed out that China’s early release of oil from its strategic reserves could boost available supplies in the world’s second-largest oil consumer.
Likewise, the United States government agreed to sell crude oil from the country’s emergency reserves to eight companies, including Exxon Mobil (XOM.N), Chevron (CVX.N), and Valero, in an auction scheduled to raise funds for the Federal budget reported Reuters.
The contracts total 20 million barrels of oil, to be delivered from Strategic Petroleum Reserve sites in Texas and Louisiana. This will take place between October 1 and December 15, the Energy Department said in a statement dated September 10.
Earlier this month, the Energy Department authorized loans of SPR crude to Exxon and Placid Refining Company LLC’s refineries in the Baton Rouge area totaling 3.3 million barrels to help them cope with the dearth of oil coming from the U.S. Gulf.
In addition, hopes for new talks on a broader nuclear deal between Iran and the West have also caught the attention of markets.
The Gulf of Mexico Is Still Not Pumping Oil
More than 80% of the oil production in the Gulf of Mexico remains closed after the passage of Hurricane Ida. Energy firms have struggled to resume production after Ida damaged rigs and caused power outages on land.
The Office of Control of Safety and Environmental Standards (BSEE) said:
“About 1.5 million barrels per day of oil production, or 84%, remains closed. While another 1.8 billion cubic feet per day of natural gas production, or 81%, is offline.”
Currently, a total of 99 oil and gas production platforms remain unmanned, compared to 288 originally evacuated. Also, the Department of Energy claimed that 5 refineries in Louisiana remained closed on Monday.
This represents around 1 million barrels per day of refinery capacity, 6% of the total operating refining capacity in the United States. Hurricane Ida’s damage to U.S. offshore energy production makes it one of the most costly since 2005.
WTI Price Remains Under Pressure
The WTI reference oil price currently has a great challenge to overcome in the current zone of $ 70.30. The uptrend line that comes from April 2020 is still in force, even after the pullback of last August.
However, the price must efficiently break above the $ 72.35 zone if the bulls are to continue to dominate.
Despite the optimism that some expect, the truth of the matter is that we must pay attention to the US Dollar. The greenback will have a great influence on the direction of oil prices.
Also, remember that there is an inverse correlation between these two assets.