Adedapo Adesanya
By Adedapo Adesanya
Crude oil prices fell on Tuesday as the market prepares for the Organisation of the Petroleum Exporting Countries and allies (OPEC+) meeting scheduled for Wednesday, September 1 (today).
The value of the commodity came under pressure after Hurricane Ida took 2 million barrels per day of refining capacity offline in the United States.
This left the Brent crude oil futures down by 42 cents or 0.6 per cent to $72.99 per barrel and dragged the West Texas Intermediate (WTI) crude oil futures lower by 34 cents or 0.47 per cent to $68.82 per barrel.
As the month came to an end, both benchmarks posted their first monthly losses since March, even though they are not far from July highs. Brent lost 4 per cent in August while US crude fell 7 per cent.
Prices on Tuesday were pressured by concerns that power outages and flooding in Louisiana after Hurricane Ida will cut crude demand from refineries.
Hurricane Ida, which made landfall in the United States on Sunday as a Category 4 hurricane, knocked out at least 94 per cent of offshore Gulf of Mexico oil and gas production and damaged the electricity grid in the state of Louisiana.
About 1.7 million barrels per day of offshore oil production was shut, but that output may resume more quickly than many refining operations along the Gulf that lost power.
Also, OPEC+ is widely expected to restore the 400,000 barrels a day of production it had previously committed to returning to the market.
The Joe Biden administration had asked Saudi Arabia and OPEC for more supply to be restored but analysts noted the cartel and its associates, like Russia, are expected to restore only the planned amount of oil to the market.
OPEC+ had agreed at the August meeting to add 400 barrels per day to monthly supply until the end of December.
The American Petroleum Institute (API) on Tuesday reported a large draw in crude oil inventories of 4.045 million barrels for the week ending August 27, bringing the total 2021 crude draw so far to more than 62 million barrels, using API data. Analysts had expected a loss of 2.833 million barrels for the week.
In the previous week, the API reported a draw in oil inventories of 1.622 million barrels—a loss smaller than the 2.367 million barrel draw that analysts had predicted.
The market will be expecting the official government data from the Energy Information Administration (EIA) which will confirm the crude inventories in the last seven days.
