Crude Oil Prices Rebound on Supply Disruptions from Tropical Storm

Crude Oil Prices Climb as Supply Concerns Intensify

Crude oil prices rebounded on Wednesday as concerns about Tropical Storm Francine disrupting oil supply outweighed worries about global demand. Brent crude futures climbed 39 cents, or 0.6%, reaching $69.58 a barrel by 0031 GMT. Similarly, U.S. crude futures increased by 44 cents, or 0.7%, to $66.19 per barrel.

On Tuesday, both benchmarks fell nearly $3, with Brent hitting its lowest level since December 2021 and WTI reaching a May 2023 low after OPEC+ revised its demand forecast down for 2023 and 2025. Analyst Hiroyuki Kikukawa stated, “the rebound was driven by the storm's potential to disrupt supply, with some production facilities already suspended”.

Market Reactions to the Storm

Tropical Storm Francine is projected to gain strength, prompting evacuations in Louisiana and causing oil and gas companies to cease Gulf of Mexico operations. The U.S. Bureau of Safety and Environmental Enforcement (BSEE) reported that approximately 24% of U.S. crude production and 26% of natural gas output were offline due to the storm.

Although OPEC forecasted a slight decrease in world oil demand growth for 2024, predicting an increase of 2.03 million barrels per day (bpd), the U.S. Energy Information Administration (EIA) indicated that global oil demand is still set for record highs this year, albeit with smaller output growth than previously expected.

In contrast, China's daily crude oil imports surged last month, marking their highest level in a year, which further complicates the outlook amidst these fluctuating prices caused by both supply fears and demand shifts.