By Adedapo Adesanya
Crude oil prices rose to a five-month high on Tuesday as the United States producers shut most offshore output in the Gulf of Mexico ahead of Hurricane Laura even as rising coronavirus cases capped gains.
The international benchmark, Brent crude, rose by 80 cents or 1.77 per cent to $45.93 per barrel, while the US West Texas Intermediate (WTI) crude gained 75 cents or 1.76 per cent to sell for $43.37 per barrel.
The prices had opened in the green territory on Monday, which was sustained on Tuesday as energy companies cut output at US Gulf Coast oil refineries. This was after shutting more than 80 per cent of the area’s offshore crude oil output as a rare double-storm assault on US oil regions threatened heavy rains and strong winds.
This saw crude prices advance after clocking three straight weekly gains, amid efforts by top producers to cut output on concerns about recovery from the damage caused by the coronavirus pandemic-related lockdowns.
Tuesday marked the highest closure for both benchmarks since March 5, the day before Saudi Arabia and Russia failed to agree on a new plan to cut supply and about a week before the World Health Organization declared COVID-19 a pandemic.
Producers in the largest oil-producing nation cut crude output ahead of Hurricane Laura at a rate approaching the level of 2005’s Hurricane Katrina and also halted most oil refining along the Texas/Louisiana coast.
The Storm Laura is expected to strengthen into a major hurricane with 115 miles per hour winds before it strikes the coast near the Texas-Louisiana border early Thursday, according to the US National Hurricane Center.
On Tuesday, producers had evacuated 310 offshore facilities and shut 1.56 million barrels per day of crude output, 84 per cent of Gulf of Mexico’s offshore production, near the 90 per cent outage that Katrina brought 15 years ago.
Despite this, analysts expect oil prices to move sideways for the time being amid increasing COVID-19 cases around the world. Worldwide cases have now surpassed 24 million.
However, prices might still be steady as the storm factor would likely overshadow the weekly storage report from the US Energy Information Administration (EIA).
Analysts forecast that crude stockpiles fell for a fifth week in a row last week but this will be confirmed from reports from the American Petroleum Institute (API) and the EIA on Wednesday.
Modupe Gbadeyanka