The increase in crude oil prices on Wednesday (October 7) was due to the assessment of supply constraints caused by the storm in oil-producing regions of the United States.
Increase in Crude Oil Prices
The price of North Sea Brent crude oil reached $101.63 per barrel, an increase of $1.05 or 1.04 percent by 4 AM GMT on Wednesday. Additionally, U.S. WTI crude oil traded at $90.24 per barrel, up 80 cents or 0.89 percent.
Read more: Stability of Oil Prices with Increased Exports from the Persian Gulf
Impact of the Storm on Oil Production
U.S. meteorological agencies have reported that a storm is developing in the Gulf of Mexico, which may affect oil and gas production facilities. Offshore areas in the Gulf of Mexico that are in the path of this storm supply 15 percent of U.S. crude oil and 5 percent of natural gas.
Tim Waterer, senior analyst at KCM Trade, stated that this storm could cause disruptions in production and refining, creating unpleasant complexities for the crude oil market.
This storm may impact six refineries located in the Gulf Coast states, which account for about 50 percent of the total refining capacity in the United States. Currently, the U.S. has a refining capacity of 18.2 million barrels per day.
Decrease in Crude Oil Inventories
Market sources reported that U.S. crude oil inventories decreased by 2.09 million barrels in the week ending October 2 (October 10). ING Bank analysts predict that the market is very concerned and sensitive to any potential supply disruptions.
Mohkesh Sahdu, senior oil analyst at Xanalysts consulting firm, pointed out that the price difference between petroleum products and crude oil indicates that attacks and shutdowns at refineries could increase refining margins and the effects of supply shortages could spill over into the crude oil market. He added that if tensions persist, crude oil prices will average around $100.
Read more: Release of 100 Million Barrels of Oil from G7 Emergency Reserves Has Begun · Forecast of Stability in Natural Gas Reserves Amid Increasing Concerns Over Price Drops
