The price of West Texas Intermediate (WTI) crude oil has seen an encouraging uptick, rising for the third consecutive day and trading at approximately $68.50 during the Asian trading session on Friday. This gain is primarily attributed to disruptions in oil production caused by Hurricane Francine, which prompted evacuations from drilling platforms along the Louisiana coast ahead of the storm’s arrival. Reports indicate that substantial interruptions have occurred in the oil output from the US Gulf of Mexico, with nearly 42% of production shut down as of Thursday.
In the aftermath of the hurricane, oil producers have been busy conducting damage assessments and implementing safety checks to ensure that operations can safely resume in the Gulf region. Analysts from UBS forecast that output in this critical area will decline by around 50,000 barrels per day (bpd) for September compared to the previous month, while FGE analysts predict an even steeper reduction, estimating a drop of 60,000 bpd and projecting a total output of 1.69 million bpd.
Compounding these supply issues are recent adjustments made by both OPEC and the International Energy Agency (IEA) to their oil demand growth forecasts. These revisions have been largely influenced by economic difficulties facing China, the world’s largest oil consumer. Furthermore, discussions at the APPEC conference highlighted China’s ongoing shift towards lower-carbon fuel sources, which is further suppressing its oil demand.
Customs data released recently showed that China’s crude oil imports from January to August decreased by an average of 3.1% compared to the same timeframe last year. This decline in demand is echoed in the US, where gasoline and distillate futures have plummeted to multi-year lows, reflecting growing concerns about weaker consumption in the world’s leading oil-consuming nation.
