Oil prices declined on Tuesday, continuing a downward trend from the previous session, following a less damaging impact than expected from Hurricane Beryl on a major U.S. oil-producing hub in Texas. Brent futures dropped by 22 cents to $85.53 per barrel as of 0321 GMT, while U.S. West Texas Intermediate (WTI) crude fell by 24 cents to $82.09.
“The decrease in oil prices today reflects market optimism regarding potential progress in ceasefire negotiations in the Middle East, coupled with the hurricane’s less severe disruption to oil supplies,” said IG market strategist Yeap Jun Rong.
Although there was a slowdown in oil refining activity and some production sites were evacuated, major refineries along the U.S. Gulf Coast appeared to have experienced minimal impact from Hurricane Beryl, which weakened into a tropical storm after hitting the Texas coast.
“Initial reports indicate that most energy infrastructure emerged from the storm largely unscathed,” noted ING analysts Warren Patterson and Ewa Manthey in a client update, highlighting that crude oil and refined fuel markets showed little concern over supply disruptions caused by the hurricane.
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These developments alleviated concerns in the market about potential supply disruptions in Texas, which produces 40% of U.S. crude oil. Major oil-shipping ports such as those in Corpus Christi, Galveston, and Houston had preemptively closed ahead of the storm, with the Corpus Christi Ship Channel reopening on Monday and the Port of Houston expected to resume operations by Tuesday afternoon. Key refiners, including Marathon Petroleum, were also in the process of restarting their refining units.
Market participants remained vigilant about developments in the Middle East for further market signals. Oil prices had decreased by 1% on Monday amid hopes that a ceasefire agreement in Gaza could mitigate concerns about global crude supply disruptions.
On the geopolitical front, senior U.S. officials engaged in talks in Egypt on Monday, though significant gaps persisted between the involved parties, according to statements from the White House. Meanwhile, Hamas voiced concerns over a new Israeli military operation in Gaza that could jeopardize a potential agreement.
Investors also awaited the release of crucial U.S. inflation data, with Federal Reserve Chair Powell scheduled to testify before Congress on Tuesday and Wednesday. The likelihood of an interest rate cut in September stood at around 80% following recent soft labor market data.
“With recent U.S. economic indicators increasing expectations for a September rate cut, confirmation from upcoming inflation data could support a more favorable outlook for oil prices,” noted IG’s Yeap.