Oil prices teetered between gains and losses on Tuesday as the market weighed concerns about Tropical Storm Gordon against rising US crude inventories. National Hurricane Center image.
Oil prices slip after early gains
Oil prices fell slightly on Tuesday after a report from a market intelligence firms showed rising stockpiles at Cushing, Oklahoma. Oil prices fell despite some shutdowns at offshore crude production platforms due to Tropical Storm Gordon.
By 3:132 p.m., EDT, benchmark Brent crude futures were down 52 cents to $77.63/barrel after hitting a session high of $79.72. US West Texas Intermediate futures were down 59 cents to $69.21/barrel, down from a session high of $71.40. The Canadian Crude Index climbed 46 cents to $44.37.
Tropical Storm Gordon is expected to become a hurricane before it makes landfall on Tuesday night near Gulfport, Mississippi.
Restrictions on vessel traffic along the US Gulf Coast have been put in place ahead of Gordon. Ports along the Gulf Coast from New Orleans to Mobile, Alabama, were shut down to inbound traffic greater than 500 tons, according to Coast Guard Petty Officer Alexandria Preston.
Cliff Porter, Harbour Master at the port of Pascagoula, Mississippi said his port was closed to traffic by the US Coast Guard.
According to the US Energy Information Administration, the US Gulf of Mexico is home to 17 per cent of all US crude production and 5 per cent of daily natural gas output. As well, the Gulf Coast is a major US refining hub.
Phil Flynn, analyst at Price Futures Group in Chicago told Reuters that currently, market participants see the market as overbought.
“That doesn’t mean the storm premium buying is over by any stretch of the imagination,” Flynn told Reuters. “It was just a little ahead of itself. There’s still a few hours to see what the storm is going to do and what other infrastructure is going to be impacted.”
Genscape reported that US crude inventories were up nearly 754,000 barrels from Aug. 24 to Friday, according to traders.
Meanwhile, the global oil markets have tightened over the past month as stockpiles are being bought up in anticipation of renewed US sanctions on Iranian crude exports.
Harry Tchilinguirian, oil strategist at BNP Paribas told Reuters he expects the Trump administration’s sanctions and other crude supply interruptions will trigger “supply issues” into 2019.
“Crude oil export losses from Iran due to US sanctions, production decline in Venezuela and episodic outages in Libya are unlikely to be offset entirely by corresponding rises in OPEC+ production,” Tchilinguirian told Reuters.
BNP Paribas says it expects Brent to average $79 in 2019.