Oil prices drop to 1-week lows as Gulf Coast storm Gordon misses major energy sites
Oil prices settled on Wednesday at their lowest levels in about a week as a major storm that passed through the Gulf of Mexico missed the bulk of the oil and natural-gas operations in the region.
“Gordon largely turned out to be a non-event for the energy market, and if anything, the sell-the-news aspect of the tropics trade has triggered a profit-taking pullback across the space,” said Tyler Richey, co-editor of the Sevens Report.
October West Texas Intermediate crude on the New York Mercantile Exchange CLV8, -0.22% the U.S. oil benchmark, fell $1.15, or nearly 1.7%, to settle at $68.72 a barrel—the lowest for the contract in just over a week. November Brent LCOX8, -0.22% the global benchmark, settled at $77.27 a barrel, down 90 cents, or almost 1.2%, on the ICE Futures Europe exchange. It marked the lowest finish since last Wednesday.
Among the oil products, October gasoline RBV8, -0.15% fell 1.5% to $1.965 a gallon, while October heating oil HOV8, -0.15% fell 0.9% to about $2.235 a gallon.
Expectations that Gordon would become a hurricane as it made landfall Tuesday had triggered a surge in oil prices Tuesday, with Brent briefly nearing the $80-a-barrel threshold. However, the storm ultimately “weakened considerably and deviated away from oil-producing areas,” said Stephen Brennock, an analyst at brokerage PVM Oil Associates Ltd. Gordon has since weakened to a tropical depression, according to the National Hurricane Center.
The U.S. Bureau of Safety and Environmental Enforcement reported midday Wednesday that personnel from 48 production platforms, which represent about 7% of all manned platforms in the Gulf of Mexico, remained evacuated because of the storm. About 9.3% of oil production and 10.4% of natural-gas production in the Gulf is shut in.
Prices have been bolstered in recent weeks and are likely to remain supported amid signs that Iranian crude exports are declining at a faster rate than expected, in the run up to November when U.S. sanctions on the country’s oil industry take effect.
OPEC, whose de facto leader is Saudi Arabia, and Russia agreed in late June to begin ramping up crude production after more than a year of holding back output. A Bloomberg survey this week showed that OPEC output rose in August to 32.74 million barrels a day—the highest level this year—up 420,000 barrels a day from July.
And on the other side of the ledger, “Chinese demand fears may be a factor finally exerting downward pressure on oil prices,” said Fawad Razaqzada, market analyst at Forex.com.
“In part, this is because of the U.S. dollar’s strength, weighing heavily on emerging market currencies, including the yuan, which in turn has pushed up the costs of all dollar-denominated DXY, -0.13% commodities,” he added. On Wednesday, however, the benchmark ICE U.S. Dollar Index eased back by 0.3% to trade nearly flat for the week.
Looking ahead, industry group the American Petroleum Institute will release its weekly U.S. petroleum-supply figures late Wednesday, with the closely watched Energy Information Administration report due Thursday. Both reports were delayed by a day this week because of Monday’s Labor Day holiday.
On average, analysts forecast a decline of 2.5 million barrels in domestic crude stockpiles for the week ended Aug. 31, according to an S&P Global Platts survey. They also expect a decline of 1.5 million barrels in gasoline supplies and see distillate stocks unchanged for the week.
Natural-gas prices, meanwhile, ended ahead of an EIA update on U.S. supplies that is due Thursday. A survey from S&P Global Platts shows expectations for a rise of 60 billion cubic feet in natural-gas inventories.
October natural gas NGV18, -0.14% settled at $2.795 per million British thermal units, down 1%.