Oil at six-week high on Gulf of Mexico storm, supply decline

US oil stockpiles fell by 8.13 million barrels last week spurring a spike in oil prices

US oil stockpiles fell by 8.13 million barrels last week spurring a spike in oil prices

Oil prices hit a six-week high on Thursday as oil rigs in the Gulf of Mexico were evacuated ahead of a storm, while an incident with a British tanker in the Middle East highlighted tensions in the region. The worldwide benchmark settled down 0.7 per cent on Thursday after hitting its highest since May 30 at $67.52 a barrel.

Oil prices were also supported by a fall in the dollar after Federal Reserve chairman Jerome Powell bolstered expectations for USA interest rate cuts.

Even reports of OPEC's decreased June production and the increased tensions between a British tanker and Iranian guard boats late yesterday failed to lift prices beyond yesterday's spike which saw WTI crude top $60 a barrel for the first time in almost two months. U.S. President Donald Trump vowed Wednesday to impose extra sanctions on Iran and accused it of violating the nuclear accord that he withdrew from closing year.

The Gulf of Mexico is home to 17% of US crude oil output which stands at around 12 million barrels per day (bpd). "If the economic outlook has deteriorated so much that the Federal Reserve feels the need for stimulus, it's hard to see fundamental justification for higher prices".

US West Texas Intermediate (WTI) crude futures were up 34 cents, or 0.6 per cent, at $60.54 a barrel.

At 1625 IST, the July crude contract on MCX was 1% higher at 4,157 rupees a bbl and the August delivery contract on NYMEX was 0.5% higher at $60.73 a bbl.

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Brent for September settlement added 22 cents, or 0.3%, to $67.23 a barrel on the ICE Futures Europe Exchange. It climbed 4.4 per cent to US$67.01 on Wednesday, the ideal shut since Might 29.

Oil companies in the United States have so far evacuated nearly 200 offshore platforms ahead of the storm, including major oil producers Shell, BP, BHP, Exxon, and more, for a loss of roughly a million barrels of oil per day. Royal Dutch Shell Plc and BP trust additionally evacuated workers.

Crude oil and copper futures jumped on Wednesday following a more dovish than expected semiannual testimony from the head of the U.S. central bank before Congress, with the former also boosted by the approach of a tropical storm to the Louisiana coast.

At current OPEC output levels of 30 million bpd, the IEA predicted that global oil stocks could rise by 136 million barrels by the end of the first quarter of 2020.

The coming shake-up in shipping fuel from new environmental rules is spurring a surge in hedging and speculative trades in China.

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