Oil prices held steady on Thursday as a massive hurricane in the Gulf of Mexico raced towards the heart of the U.S. oil industry, which has forced oil rigs and refineries to shut down production.
Brent crude LCOc1 futures for October, which expire on Friday, rose 13 cents, or, 0.3% to $45.77 a barrel by 0540 GMT, having fallen 22 cents, or 0.5%, on Wednesday. The more active November Brent contract LCOc2 was up 10 cents at $46.26 per barrel.
U.S. West Texas Intermediate (WTI) crude CLc1 futures inched up 1 cent to $43.40 a barrel.
The threat from Hurricane Laura has pushed the market higher this week, but the storm is not expected to affect supplies much because oil and product inventories remain high due to the coronavirus pandemic’s hit to fuel demand.
That global supply overhang is weighing over any bullish sentiments on price resulting from the hurricane, industry analysts said.
“It really depends on the damage sustained. But there’s a huge mitigation in that (crude) stockpile levels are at their highest in decades,” said Vivek Dhar, a commodities analyst at Commonwealth Bank.
U.S. crude inventories stood at 507.8 million barrels at the end of the week to Aug. 21, even after a larger-than-expected drop of 4.7 million barrels.
Laura may be the most powerful storm to crash into the Louisiana coast when it makes landfall in the early hours of Thursday local time, bringing the potential for catastrophic damage and what forecasters called an “unsurvivable storm surge”.
“The hurricane has been upgraded to a Category 4, and there are real concerns over the impact when the storm makes landfall,” said ING analyst Warren Patterson.
The oil-refining town of Port Arthur was directly in Laura’s path, the U.S. National Hurricane Center forecast.
Oil producers on Tuesday shut 1.56 million barrels per day (bpd) of crude output, or 84% of the Gulf of Mexico’s production, evacuating 310 offshore facilities.
Nine refineries that convert nearly 2.9 million bpd of oil into fuel, or about 15% of U.S. processing capacity, were also shutting down.
Reporting by Sonali Paul and Koustav Samanta; Editing by Lincoln Feast and Tom Hogue