Oil prices rise as Delta storm approaches US Gulf of Mexico

8 October 2020 (Last Updated October 8th, 2020 11:26)

Oil prices have edged up as oil workers have been evacuated from the rigs in the US Gulf of Mexico ahead of Hurricane Delta.

Oil prices rise as Delta storm approaches US Gulf of Mexico
The US Gulf of Mexico region has been severely hit by several storms over the past few months. Credit: Elias Sch / Pixabay.

Oil prices have edged up as oil workers have been evacuated from the rigs in the US Gulf of Mexico ahead of Hurricane Delta.

However, fuel demand concerns continue to persist due to fading hopes for a US economic aid deal and an increase in the US crude inventories.

Brent LCOc1 futures rose $0.31 or 0.74% to reach $42.30 a barrel, while US West Texas Intermediate (WTI) crude CLc1 futures increased by $0.27 or 0.68%, touching $40.22 a barrel, Reuters reported.

Oil major Chevron has evacuated 183 offshore facilities and halted approximately 1.5 Mbpd of oil output as Hurricane Delta is forecast to intensify into a Category 3 storm with winds of up to 193km/h.

According to the US Government, the Gulf of Mexico produced 1.65 Mbpd in July.

The region accounts for 17% of US crude output. It has been severely hit by several storms over the past few months.

Oil prices were also supported by the production outages in Europe’s North Sea because of a strike of the Norwegian oil workers.

Equinor noted that its Johan Sverdrup oilfield in the North Sea will have to shut down production unless the strike ends by 14 October.

Johan Sverdrup oilfield is the largest in the North Sea with an output capacity of up to 470,000 bpd of oil.

According to the news agency, the possibility that ‘there will be no upcoming economic support measures’ comes as government data reported that oil demand at US refineries is 13.2% lower compared with the previous year.

This underscored the drop in fuel demand from the interruptions caused as a result of the Covid-19 pandemic.

ANZ commodities analyst Vivek Dhar said: “A piecemeal approach to US fiscal stimulus is unlikely to alter a deteriorating demand outlook for oil.”

Meanwhile, data released by the industry group US Energy Information Administration (EIA) showed that the US gasoline stocks fell to their lowest levels since November.