Oil prices surged nearly 2% on Thursday, continuing a rebound driven by concerns over Hurricane Francine’s impact on U.S. production. However, a bleak demand forecast limited further gains.
Brent crude futures for November increased by $1.24, or 1.8%, reaching $71.85 a barrel by 1008 GMT. U.S. crude futures for October rose $1.26, or 1.9%, to $68.57 a barrel.
Both contracts had climbed more than 2% in the previous session due to Hurricane Francine’s disruption of offshore platforms in the U.S. Gulf of Mexico and refinery operations in southern Louisiana, where the storm made landfall on Wednesday.
UBS analysts estimated that Hurricane Francine has likely impacted about 1.5 million barrels of U.S. oil production. They predict a reduction of approximately 50,000 barrels per day (bpd) in Gulf of Mexico production for September.
On Wednesday, nearly 39% of oil and almost half of natural gas production in the Gulf of Mexico was offline, according to the offshore regulator. A total of 171 production platforms and three rigs had been evacuated.
Priyanka Sachdeva, senior market analyst at Phillip Nova in Singapore, noted that the Gulf of Mexico region accounts for about 15% of U.S. oil production. Disruptions in this region could tighten oil supplies in the short term.
Despite the storm’s effects, attention in the oil market has shifted towards weaker demand. The International Energy Agency (IEA) on Thursday revised its 2024 oil demand growth forecast down by 70,000 bpd, or about 7.2%, to 900,000 bpd, citing subdued demand from China.
The Energy Information Administration (EIA) reported that U.S. oil stockpiles increased last week due to higher crude imports and lower exports.
Despite concerns about Hurricane Francine, the medium-term outlook for WTI crude remains bearish. This is due to weak demand from China and “growth scare concerns” in the U.S., according to Kelvin Wong, senior market analyst at OANDA.
Earlier this week, OPEC lowered its forecast for global oil demand growth for this year and also reduced its expectations for 2025, marking its second consecutive downward revision. Both oil benchmarks fell sharply on Tuesday following this announcement.
Investors are now looking ahead to the U.S. Federal Reserve’s policy meeting on September 17-18, where a potential cut to interest rates could stimulate economic growth and increase oil demand.
Traders are also awaiting additional U.S. economic data expected later on Thursday.