By Shariq Khan
NEW YORK (Reuters) -Oil prices rose more than 2% on Thursday as producers assessed the impact on production in the U.S. Gulf of Mexico after Hurricane Francine tore through offshore oil-producing areas before being downgraded to a tropical storm.
More than 730,000 barrels per day, or nearly 42%, of oil production in the Gulf of Mexico was halted Thursday due to Storm Francine, the U.S. Bureau of Safety and Environmental Enforcement said.
U.S. West Texas Intermediate crude futures rose $1.66, or 2.5%, to settle at $68.97 a barrel. futures rose $1.36, or 1.9%, to $71.97 a barrel.
Both contracts were up more than 2% on Wednesday as companies evacuated offshore platforms because of Francine. The disruptions are estimated to reduce production from the Gulf of Mexico by about 50,000 barrels per day this month, UBS analysts said.
However, some analysts warned that Francine’s impact could be short-lived as it lost intensity quickly after making landfall in Louisiana on Wednesday evening. That could turn the oil market’s attention back to a lack of global demand, said Alex Hodes, an analyst at StoneX, in a note to clients.
Oil and fuel export ports from south to central Texas had already reopened Thursday and refineries were also ramping up.
Concerns about weak global oil demand, especially from top importer China, have weighed heavily on prices in recent months. Brent crude futures fell close to a three-year low on Tuesday after producer group OPEC+ cut its annual demand growth forecasts for the second month in a row.
The International Energy Agency on Thursday cut its 2024 demand growth forecasts by more than 7% to 900,000 barrels per day, citing weak demand in China and weak growth in other regions.
The US, the largest oil consumer, is also showing signs of weak demand. The country’s oil inventories rose last week as crude imports grew, exports fell and fuel demand fell, data from the Energy Information Administration (EIA) showed on Wednesday.
U.S. gasoline prices are trending toward three-year lows due to weak demand and abundant supply, analysts said. US gasoline consumption represents nearly 9% of global oil demand.
Market participants are also closely following a weeks-long crisis over control of Libya’s central bank, which has led to oil production and export cuts from the country. A provisional agreement was reached last week to resolve the crisis, but the situation remains fluid.
Analysts at FGE said crude production in Libya is recovering and exports are resuming, but warned that a full recovery remains uncertain.
