By Adedapo Adesanya
Crude oil prices made no improvement as Hurricane Laura spared most of the US oil infrastructure against all expectations.
The international benchmark, Brent crude, dropped 4 cents or 0.16 per cent to $45.05 per barrel and the United States West Texas Intermediate (WTI) crude fell 7 cents or 0.16 per cent to trade at $42.97 per barrel.
As energy companies cut output of more than 84 per cent of the area’s on threats of heavy rains and strong winds, crude prices rose but as the storm passed, this was erased.
According to market analysts, the damage is not as bad as anticipated, creating more sell pressure. More than 3 million barrels a day of refining capacity had been shut ahead of the storm, most of which should come back online fairly quickly.
Hurricane Laura hit Louisiana on the US gulf coast, yesterday, with 150 miles per hour winds, destroying buildings and cutting power supply to more than 650,000 people in Louisiana and Texas. But oil refineries were spared from the storm.
Despite this, oil prices headed for their sixth weekly gains in the last seven, amid efforts by top producers to cut output on concerns about recovery from the damage caused by the coronavirus pandemic-related lockdowns.
Earlier in the week, 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.
Also, both benchmarks hit five-month highs during the week but the short term pull of the disaster didn’t do much to hold it even after the Energy Information Administration (EIA) reported a crude oil inventory draw of 4.7 million barrels for the week to August 21.
At 507.8 million barrels, oil inventories are 15 per cent above the five-year average for this time of the year. Last week’s draw compares with a 1.6-million-barrel decline in inventories for the previous week.
Analysts had expected an inventory draw of 3.833 million barrels for the week to August 21. The American Petroleum Institute yesterday estimated crude oil inventories had shed 4.524 million barrels in the reported period.
On what should have been good news, this doesn’t look too positive especially with data-backed suggestions that demand will not recover to pre-pandemic levels next year.
