Oil extended gains on Wednesday, advancing by over 2%, as a hurricane halted offshore operations in the United States oil and gas sector and an industry report pointed to a fall in the country’s crude stockpiles.
Beyond a quarter of U.S. offshore production was closed down on Tuesday because of Hurricane Sally. That same day, the American Petroleum Institute (API) reported that crude storage tumbled by 9.5 million barrels, despite analysts’ expectation to the contrary.
Brent crude added 88 cents or 2.17% to $41.41 a barrel by 11:26 West Africa Time, while U.S. crude rose 90 cents or 2.35% to $39.18. Both contracts rose by more than 2% on Tuesday.
Bonny Light, Nigeria’s top oil grade, rose 58 cents or 1.51% to $39.10 per barrel on Tuesday just as Qua Iboe, another major national crude grade, advanced by 35 cents or 0.87% to $39.76.
“Overnight, the API provided a further injection of bullish impetus. As much as a feel-good factor appears to have returned to the oil market; underlying fundamentals remain far from supportive,” said Stephen Brennock of oil broker PVM.
It is probable that the shutdowns will help decrease stockpiles even though refineries also did not operate. Stocks figures from the Energy Information Administration; which do not always chime with those of the API, are due later on Wednesday.
Oil prices plunged new lows as the coronavirus pandemic crippled demand. An unprecedented supply cut by the Organisation of the Petroleum Exporting Countries (OPEC) and its allies called OPEC+ as well as lockdown relaxations have supported Brent’s recovery from a 21-year low below $16 in April.
This month, soaring coronavirus cases have weighed on prices just as fears; regarding demand have also done so.
OPEC and International Energy Agency have scaled down their demand outlooks this week.
On Thursday, an OPEC+ oil ministers’ panel will sit to consider the output agreement; and is not likely to prescribe greater output curbs regardless of the fall in price, according to Reuters’ sources.