Oil prices fluctuated around five-month highs as Hurricane Laura bore down on the Gulf of Mexico, causing US producers to stop most of their offshore output.
The hurricane and hopes over US-China trade talks added upward pressure. But worries over coronavirus cases and future demand caused prices to slip back slightly in morning trading.
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Brent crude, the global benchmark, was down 0.7 per cent to $45.70 per barrel. It had risen in early trading, and yesterday hit a five-month high of more $46 per barrel.
WTI crude, the US benchmark, was down 0.5 per cent at $43.20 a barrel. That was shy of yesterday’s five-month high of around $43.60 a barrel.
The price moves came as the US energy industry braced itself for a major hurricane, named Laura, which is expected to hit on Thursday morning.
It was expected to grow to Category 4 strength, the Hurricane Centre said. Thousands of people have been told to evacuate their homes.
More than 80 per cent of oil production closed
Oil producers on the Gulf Coast, which includes Florida, Alabama, Mississippi and Louisiana, evacuated 310 offshore facilities. They shut 1.56 million barrels per day of crude oil output. That amounted to 84 per cent on the Gulf’s offshore production.
Laura has been compared to 2005’s Hurricane Rita, which caused more than 100 deaths and an estimated $25bn (£19bn) in damage.
“This storm certainly can cause unprecedented devastation,” said Lina Hidalgo, the executive for Harris County in Texas. “We truly have to say: Prepare for the worst.”
“It is said that the US refineries could lose as much as 12 per cent of their capacity for more than six months,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Yet he cautioned that “supply-side news tends to have an ephemeral positive impact on oil prices”.
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“The global oil market remains swamped with excess supply and prospects of slow recovery in global demand should cap the upside potential.”
Rising coronavirus cases around the world worried investors. A resurgence of the virus could lead to lockdowns being reimposed, which would dent demand for oil.