Home » International oil prices are under pressure, and the hurricane destroys demand for refineries; but there are variables for OPEC+ to increase production. Provider FX678

International oil prices are under pressure, and the hurricane destroys demand for refineries; but there are variables for OPEC+ to increase production. Provider FX678

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International oil prices are under pressure, and the hurricane destroys refinery demand; but OPEC+ increases production, there are variables

On Tuesday (August 31), international oil prices weakened, and people were worried that the power outage and floods in Louisiana in the United States after Hurricane Ida would reduce the demand for crude oil from refineries. However, whether the Organization of Petroleum Exporting Countries and its partners (OPEC+) will further increase production is also variable, limiting the decline in oil prices.

At 15:07 Beijing time, NYMEX crude oil futures fell 0.16% to US$69.10/barrel; ICE Brent crude oil futures fell 0.13% to US$72.14/barrel.

Ravindra Rao, Vice President of Commodities at Kotak Securities, said: “The oil market is on the sidelines, and the market is assessing the impact of Hurricane Ida on supply and demand. In addition, market participants are on the sidelines before tomorrow’s OPEC+ meeting.”

Hurricane Ida interrupted oil and gas production off the Gulf of Mexico by at least 94%. After 288 drilling rigs were evacuated, approximately 1.72 million barrels per day of oil production and approximately 2.01 million cubic feet per day of natural gas production on the U.S. side of the Gulf of Mexico were suspended.

Ada also caused “catastrophic” damage to the Louisiana power grid. Utilities officials said the power outage may last for three weeks, slowing the process of repairing and restarting energy facilities, and it may take at least two weeks for these facilities to fully resume operation. Companies are currently assessing the damage, and it is not yet certain how long the capacity shutdown will last.

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Entergy Corp (ETR.N), the largest power company in Louisiana, warned of “catastrophic” damage to transmission lines. The utility company said that a tower providing electricity collapsed during the peak of the storm and electrical wires fell into the Mississippi River.

An ExxonMobil (XOM.N) spokesperson said that due to lack of electricity and raw materials, the company stopped operations at its Baton Rouge oil processing and chemical complex with a daily output of 520,000 barrels. Phillips 66 (PSX.N) spokesperson Bernardo Fallas said that “under safe conditions,” the company will conduct a post-storm assessment of an oil refinery located in a severely affected area of ​​Louisiana.

Consultancy Gas Buddy said that due to processing halts, power outages may help push up retail gasoline prices by 5 to 15 cents per gallon. Petroleum analyst Patrick De Haan said that the extent of price increases will depend on the speed at which electricity and major fuel pipelines resume operations.

The Colony Pipeline Company (COLPI.UL) owns the largest fuel pipeline network in the United States, supplying nearly half of the gasoline on the East Coast of the United States. The company expects to resume pumping gasoline and diesel on the closed pipeline from Houston to Greensboro, North Carolina on Monday night.

According to sources from the Organization of Petroleum Exporting Countries and its partners (OPEC+), OPEC+ is expected to maintain its oil production policy unchanged and continue to advance its plan to increase the supply of 400,000 barrels per day by December this year. This also limits oil prices.

OPEC+ will hold a meeting on Wednesday (September 1) to discuss the previously reached agreement to increase production by 400,000 barrels per day in the next few months. However, the Kuwaiti Petroleum Minister said on Sunday that OPEC+ may reconsider the production increase agreement reached last month due to concerns that the raging new crown epidemic in Asia will limit fuel demand.

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The US government previously called on OPEC+ to increase oil production to curb the rising oil prices. The US believes that rising oil prices will threaten the recovery of the global economy. However, OPEC+ sources said that the recent increase in oil prices is temporary, mainly due to supply disruptions in Mexico and severe storms hitting the US Gulf Coast over the weekend.

OANDA senior market analyst Jeffrey Halley said: “Brent crude oil between US$70 and US$75 per barrel seems to be in line with OPEC+’s best strategy, and with spot premiums, despite short-term market noise, demand remains strong.”

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