Oil futures traded lower Tuesday, with U.S. Gulf Coast refineries struggling to resume operations after being knocked offline by Hurricane Ida.
Traders were also looking ahead to a Wednesday meeting of the Organization of the Petroleum Exporting Countries and its allies, a group collectively known as OPEC+.
West Texas Intermediate crude for October delivery the U.S. benchmark, fell 53 cents, or 0.8% to $68.68 a barrel on the New York Mercantile Exchange. October Brent crude the global benchmark, was off 56 cents, or 0.8%, at $72.85 a barrel on ICE Futures Europe. The most actively traded November contract fell 39 cents, or 0.5%, to $71.84 a barrel.
As producers assess damage and begin to resume output in the Gulf, it will probably take somewhat longer for crude oil processing to return to normal “as the refineries first have to be checked for damage, and any damage then repaired,” said Carsten Fritsch, analyst at Commerzbank. “If oil production recovers more quickly than demand from refineries, crude oil stocks will rise. The upcoming inventory data will certainly be influenced significantly by the hurricane.”
The Bureau of Safety and Environmental Enforcement late Monday estimated that 94.6% of current oil production in the Gulf of Mexico was shut in, along with 93.57% of natural-gas production. As a result, around 1.72 million barrels a day of crude output and 2 billion cubic feet a day of gas production remain offline, according to S&P Global Platts.
Analysts at S&P Global Platts estimated about 2.2 million barrels a day of refining capacity remained offline, with the majority of plants without power.
Meanwhile, OPEC+ is slated to meet Wednesday. The group agreed previously to unwind production cuts, boosting output in monthly increments of 400,000 barrels a day beginning this month. The Biden administration subsequently pressed the group to further increase output.
Reuters, citing OPEC+ sources, reported Monday that the group is unlikely to make any changes to its plans.