Oil prices recovered in Asian trade on Wednesday after plunging to near three-year lows, as traders weighed the potential impact of Hurricane Francine on U.S. oil production and an unexpected drawdown in oil inventories.
Brent crude futures for November delivery rose 0.5% to $69.51 per barrel, while West Texas Intermediate (WTI) crude futures climbed 0.6% to $65.50 per barrel.
Hurricane Francine Disrupts Gulf of Mexico Oil Production
Hurricane Francine, which intensified into a category-one storm late Tuesday, is expected to make landfall in Louisiana by Wednesday. In response, several oil and gas producers have suspended operations in the Gulf of Mexico, a region that accounts for roughly 15% of U.S. oil output. This disruption is anticipated to tighten supply in the near term as companies brace for the storm’s impact.
Unexpected U.S. Oil Inventory Draw Boosts Prices
Further supporting the rebound, the American Petroleum Institute (API) reported an unexpected drop in U.S. oil inventories for the week ending September 6, with stocks falling by 2.79 million barrels, contrary to market forecasts of a 0.7 million barrel increase. Gasoline inventories also fell, signaling robust demand in the U.S., even after the summer travel season. Official inventory data from the U.S. government, expected later on Wednesday, is anticipated to confirm this trend.
Global Demand Concerns Continue to Weigh on Oil Markets
Despite the recent price uptick, broader concerns about weak global demand remain. Tuesday’s sharp sell-off had brought oil prices to their lowest since December 2021, driven by soft economic data from China, the world’s largest oil importer, which showed a third consecutive month of declining oil imports in August.
Additionally, the Organization of Petroleum Exporting Countries (OPEC) revised down its forecast for global oil demand growth in 2024 to 2.03 million barrels per day, down from a previous estimate of 2.11 million barrels per day, adding to cautious market sentiment.
