The price of oil is encouraged by hurricane sally
Hurricane Sally and strong China data boost oil prices.
Oil prices regain momentum on Tuesday, after strong data from China’s industrial production and retail sales assured the market that at least one of the world’s major demand centers is still on a clear path to recovery.
At 3:15 p.m. (CET), US crude futures rose 1.1% to $ 37.67 per barrel, while the international benchmark Brent oil posted a 0.9% rise to 39 , $ 98 per barrel.
RBOB’s US gasoline futures are weighing on the move in crude, which rises 0.3% to $ 1.1105 a gallon.
The gains were limited by the monthly report of the International Energy Agency, which corroborated the dire forecasts of the OPEC report on Monday. The agency has lowered its forecast for global demand this year by another 300,000 barrels a day to a level last recorded in 2013.
“We believe that the recovery in oil demand will slow down markedly in the second half of 2020, as most of the easy gains have already been made,” the agency says in its report. “The road ahead is treacherous in the face of increasing Covid-19 cases in many parts of the world.”
The agency drew particular attention to the role played by India, one of the world’s largest importers, currently beset by the worst coronavirus curve in the world, with increases of more than 94,000 new cases a day and more than 1,100 deaths a day. .
Along with reports from the International Energy Agency and OPEC, a new report from BP (LON: LON: BP) on Monday continued to weigh down confidence. BP argued that world oil demand could begin its long-term decline more than a decade earlier than previously thought, as the structure of the world economy and world energy use change under the influence of the pandemic.
The arrival of Hurricane Sally has quietly helped, as the US BSEE said that more than 21% of the Gulf of Mexico’s production capacity had been interrupted as a precaution. Still, that is far less than was affected by Hurricane Laura earlier in the season, and the continued high level of crude reserves means that any temporary Gulf shortfall will hardly go unnoticed.
The National Hurricane Center has downgraded Sally to a Category 1 hurricane. It should make landfall between New Orleans and Florida’s Mango later this week, far from the concentration of refineries in East Texas and West Louisiana. Thus, its ability to disrupt the market should be much less than that of Laura.
At 10:30 p.m. (CET), the American Petroleum Institute will release its weekly estimate of US reserve levels.
“If the shares rise again, which is not unlikely, it would be another bearish sign for the market,” explains Bjornar Tonhaugen, senior oil market analyst at consultancy Rystad Energy. “But this time we must not lose sight of floating storage as well as the figures for onshore reserves may not offer the complete picture.”