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HomeWorldOil prices rise 2% on U.S. Gulf output cuts, supply outlook

Oil prices rise 2% on U.S. Gulf output cuts, supply outlook

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Oil rose more than $1 a barrel on Tuesday from a nine-month low a day earlier, supported by supply curbs in the U.S. Gulf of Mexico ahead of Hurricane Ian.

Prices also drew support from analyst expectations of possible supply cuts from the Organization of the Petroleum Exporting Countries and allies (OPEC+), which is to meet to set policy on Oct. 5.

Brent crude was up $1.92, or 2.3 per cent, to $85.98 a barrel at 1:21 p.m. EDT (1721 GMT). On Monday it fell as low as $83.65, the lowest since January. U.S. West Texas Intermediate (WTI) crude was up $1.68, or 2.2 per cent, at $78.39.

U.S. offshore oil producers said they were keeping an eye on Hurricane Ian’s track as the powerful storm shut in at least 480,000 barrels of oil production as it entered the U.S. Gulf of Mexico and barrelled toward Florida.

The outages may only provide a momentary reprieve for oil prices, Jim Ritterbusch, of Ritterbusch and Associates, said in a note.

“Outages are apt to prove brief,” Ritterbusch said, adding that the Gulf of Mexico represents “only about 15 per cent of total U.S. production amidst this shale age” so the effect “is apt to be minimal.”

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After shutting some its offshore crude production, BP Plc said the storm didn’t pose a threat to its Gulf of Mexico assets and it was working to redeploy workers to oil platforms.

Crude prices had soared after Russia invaded Ukraine in February, with Brent in March coming close to its all-time high of $147. Recently, worries about recession, high-interest rates and dollar strength have weighed.

A view shows oil terminal Kozmino near Nakhodka
“Oil is currently under the influence of financial forces,” said Tamas Varga of oil broker PVM.

A booming U.S. dollar, which held close to a 20-year high, kept oil from moving higher. A strong dollar makes crude more expensive for buyers using other currencies.

The oil price drop in recent months has raised speculation that OPEC+ could intervene. Iraq’s oil minister on Monday said the group was monitoring prices and did not want a sharp increase or a collapse.

“Only a production cut by OPEC+ can break the negative momentum in the short run,” said Giovanni Staunovo and Wayne Gordon of Swiss bank UBS.

The market is awaiting the latest U.S. inventory reports, which analysts expect will show a 300,000-barrel increase in crude stocks. The American Petroleum Institute’s report is out on Tuesday at 4:30 p.m EDT (2030 GMT).

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