Oil up 2% on Storm Concerns as Another U.S. Crude Build Dawns

© Reuters.

By Barani Krishnan

Investing.com - Oil had its first major gain in nearly a week on Tuesday as crude prices rallied on production shutdowns ahead of the hurricane barreling toward the U.S. Gulf Coast of Mexico.

But forecasts indicating that the U.S. government will likely report a second-straight week of stockpile builds for last week in data due on Wednesday means that any rebound in oil could be limited.

Traders expect the Energy Information Administration, or EIA, to say in its report for the week ended Sept. 11 that  crude stockpiles grew by 1.271 million barrels, adding to the 2.032 million-barrel spike from the week ended Sept. 4.

EIA data aside, the International Energy Agency said on Monday that it expects global oil demand growth to fall by 8.4 million barrels per day year-on-year to 91.7 million bpd. That is a deeper contraction than the 8.1 million bpd decline previously estimated.

“It is hard to get excited about higher oil prices as the demand outlook remains shaky due to winter virus wave fears and as the OPEC+ alliance seems to be falling apart as cheaters secure more market share,” said Ed Moya, an analyst at New York’s OANDA.

The Saudi-steered and Russia-assisted OPEC+ alliance of global oil producers said at its most recent meeting that it will not impose unilateral production cuts to try and boost falling crude prices.

New York-traded West Texas Intermediate, the key indicator for U.S. crude price, settled the day up $1.02, or 2.7%, at $38.28 per barrel — its biggest one-day gain since Sept. 9.

London-traded Brent crude, the global benchmark for oil, closed the New York trading session up 92 cents, or 2.3.%, at 40.85. 

Crude prices rose as Hurricane Sally, the Atlantic region storm due to make landfall later Tuesday, shut down 27% of oil production and 28% of natural gas output in the Gulf Coast.