With Hurricane Delta heading toward the energy producing Gulf of Mexico region, oil prices have advanced to the highest price in two weeks. Futures of both U.S. benchmark crude futures and gasoline futures climbed over 4% today.
The hurricane Delta forecast to become a Category 4 is expected to move through U.S. Gulf before hitting the Louisiana coast. Companies in the region are preparing for the storm and Bristow Group began to remove workers from their oil and natural gas platforms.
Meanwhile, House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin will resume talks on today on another round of pandemic relief funding, boosting the prospect for energy demand to also improve. Still, Federal Reserve Chair Jerome Powell warned of a weak U.S. recovery without sufficient government aid.
“Gasoline is higher because of potential for an increase in demand,” and the rally “is driving crude oil with it to a certain degree,” said Bob Yawger, head of the futures division at Mizuho Securities. At the same time, while the storm may end up disrupting refiners that contribute to demand for crude, “the knee-jerk reaction is to the likelihood of rigs and production being shut down in the gulf.”
Crude was swept up in a broader market rally Monday and was aided by a strike in Norway that has shut fields and is curbing flows. Still, the outlook for global oil demand remains patchy with stricter lockdowns coming into force in parts of Europe.
“The rally today is a continuation of yesterday’s bounce-back, which was built on a trifecta of bullish factors,” said Harry Tchilinguirian, head of commodities strategy at BNP Paribas SA. That includes “the rapid recovery of President Trump, the strike in Norway’s oil sector and improved technicals as oil’s price moved back to its 100-day moving average.”
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