On Monday, oil prices rose for a second session as the market benefited from concerns over shut-downs in the United States, the world’s largest producer, following Hurricane Ida.
In the early hours of Monday, Brent crude prices increased by nearly a percent to $73.59 a barrel, while West Texas Intermediate (WTI) crude prices also rose by 1%, to $70.38. Earlier in the day, both markets reached their highest levels since Sept. 3.
Brent’s prompt time spread increased to 67 cents a barrel in backwardation, up from 60 cents last week. This is a bullish pattern, with prices on the near-term trading above those on the longer-term.
The U.S Gulf of Mexico has been shut off to offshore oil production for around three-quarters of a year, or roughly 1.4 million barrels per day, the amount of oil production Nigeria produces as an OPEC member.
From the impact of Hurricane Ida, refiners are recovering faster than oil producers, reversing the trend from past storms. There was a slight increase in refinery output on Friday after most of the storm-impacted refineries reopened.
Despite damages to offshore facilities caused by Hurricane Ida, Royal Dutch Shell Plc cancelled some export cargoes on Thursday, indicating continued energy losses.
Energy service provider Baker Hughes reported an increase in rigs operating in the United States last week, possibly indicating an increase in production.
Besides the impact of Ida, the market will be closely watching how the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) intend to update oil demand forecasts this week as Coronavirus cases continue to rise.
In the short term, financial markets need clarity about the virus’ effects, and until that happens, most assets, including oil, might drift sideways.
China’s plan to release oil from its strategic reserves poses supply risks, but fresh talks on a broader nuclear agreement were raised after the Iranian officials and the atomic watchdog have resolved an issue regarding monitoring equipment that has been overdue for maintenance.