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Oil Lowers amid Slow Recovery in Gulf Coast Operations

Oil futures on Friday traded edged lower, on the back of a slow post-hurricane recovery in energy operations at the Gulf of Mexico and a weaker-than-expected climb in U.S. nonfarm payrolls last month.

Investors assessed the U.S. Gulf Coast, where the aftermath of Hurricane Ida last weekend has left a swath of carnage and oil refineries in Louisiana shut in. Remnants of the storm also buffeted the U.S.’s Northeast on Thursday, leaving at least 45 people dead.

“It appears that the damage caused by Hurricane Ida is presenting greater challenges than any Gulf storm we’ve seen, perhaps since Harvey or Katrina, because of the damage it’s done to Port Fourchon, Louisiana, a major staging area for operations in the Gulf of Mexico,” said Phil Flynn, senior market analyst at The Price Futures Group.

The Bureau of Safety and Environmental Enforcement reported Thursday that 93.55% of Gulf oil production and 91.29% of natural-gas production have been shut-in. That shows little improvement from shut ins of 93.69% for oil and 94.47% for natural gas the day before.

Production is “coming back more slowly,” said Flynn, in a daily report.

West Texas Intermediate crude for October delivery on the New York Mercantile Exchange was trading 31 cents, or 0.5%, lower at $69.68 a barrel, after closing up 2% on Thursday and logging the highest settlement for a front-month contract since Aug. 3, according to Dow Jones Market Data.

For the week, prices for the U.S. benchmark traded 1.5% higher.

Global benchmark November Brent crude was trading 3 cents, or 0.1%, lower at $73.02 a barrel on ICE Futures Europe, looking at a weekly rise of 1.6%.

Oil futures this week have been supported by data that showing a sharp drop in U.S. crude inventories for the week ended Aug. 27, even as OPEC and its allies decided Wednesday to stick to a plan to increase oil production by 400,000 barrels a day each month from August.

On Nymex Friday, October gasoline added nearly 0.1% to $2.17 a gallon, trading more than 2% higher for the week. October heating oil edged down by 0.1% to trade at $2.16 a gallon, but up nearly 2.8% for the week.

Data released Friday showed U.S. nonfarm payrolls rose by 235,000 jobs in August, well below the 720,000 increase expected by economists surveyed by The Wall Street Journal. Weaker than expected economic data can dull expectations for energy demand.

October natural gas looked to stretch its streak of gains to a fourth straight session, up 1.1% at $4.69 per million British thermal units, with front-month prices holding ground at their highest since November 2018. For the week, they traded up by 7%.

Natural-gas prices climbed on Thursday after the Energy Information Administration reported a weekly rise of 20 billion cubic feet in supplies of the fuel in storage. Supplies remain below the year-ago and five-year average levels.

“Offshore natural gas production remains nearly entirely offline, with a full return of production currently not in sight” following Hurricane Ida, said Christin Redmond, global commodity analyst at Schneider Electric, in a daily report.

“While most Louisiana ports have reopened to vessel traffic as of [Thursday], damage to roads and power and water services infrastructure around Port Fourchon have made it unlikely that offshore production will ramp up quickly,” she said.

Source: Marketwatch

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