Analysis Energy
Oil at lowest point in almost three years
About 2.5 weeks ago, oil was still above $80 per barrel. Now the oil price has dropped below $70. The OPEC revised its forecast for global oil demand downward last week. Despite a quarter of the drilling platforms and other oil facilities in the Gulf of Mexico being closed due to Hurricane Francine, oil is at its lowest level in almost three years.
Lack of demand has been a bearish factor for oil for some time. Both China and the US recently reported disappointing figures. The oil cartel OPEC released its monthly report on Tuesday, September 10, and slightly revised its forecast for global oil demand for both 2024 and 2025. For 2024, it was revised down by 80,000 barrels per day to around 2 million barrels per day, and for 2025 by 40,000 barrels to 1.7 million per day.
The total is still higher than the average of 1.4 million barrels per day in the pre-coronavirus period, noted the oil cartel. However, the market does not seem to be able to put it into perspective, as the Brent benchmark fell below $70 ($69.19) on Tuesday after the publication of OPEC's forecasts. 2.5 weeks ago (on August 26), oil was still well above $80 ($81.43).
Quarter of oil production in Gulf of Mexico shut down
Oil prices rose slightly again due to storm Francine reaching hurricane strength on Tuesday and since then has been battering the southern coast of the United States. 23.55% of oil production in the Gulf of Mexico (see photo above this article) has been scaled back since Tuesday, according to the US government agency BSEE (Bureau of Safety and Environmental Enforcement). In absolute numbers, this amounts to 412,070 barrels per day.
After the storm passes, the facilities will be inspected. Then the undamaged facilities can resume their activities. Facilities that have been damaged may take longer to get back into operation, according to the BSEE. Several oil terminals in ports are also closed due to the hurricane.
During Wednesday afternoon, oil prices continued to decline. The publication on Wednesday afternoon of the weekly report from the US Energy Agency EIA on US oil inventories was a factor. The oil inventories increased by 0.8 million barrels, which was less than expected. The US commercial crude oil inventories are now 419.1 million barrels, approximately 4% below the five-year average for this time of year. At the time of writing (Wednesday afternoon 5:00 PM), oil is priced at $69.27.
