Oil Price Fundamental Daily Forecast – Gulf Storms Threatening Production, Refining Activities

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher early Monday as a pair of hurricanes prepared to move into the Gulf of Mexico. The current path predicted by the National Hurricane Center has the storms zeroing in on crude oil and national gas facilities in Southern Texas. The news has prompted oil companies in the region to shut down more than half of their oil production.

At 09:47 GMT, October WTI crude oil futures are trading $42.66, up $0.32 or +0.76%. December Brent crude oil is at $45.70, up $0.31 or +0.68%.

Hurricane Scare Threatens Gulf Production

Energy companies shut more than 1 million barrels per day (bpd) of offshore crude oil production in the U.S. Gulf of Mexico because of the twin threat from Hurricane Marco and Tropical Storm Laura. Workers have been evacuated from more than 100 production platforms.

Rig Count Increases

Perhaps helping to keep a lid on crude oil prices is an increase in the U.S. oil and natural gas rig count for the first time since March, with the addition of the most oil rigs in seven months as shale producers resume drilling.

According to the August 21 rig count released by Baker Hughes, the U.S. rig count grew by 10 rigs from the August 14 count.

The number of working U.S. rigs jumped by 10 from 244 on August 14 to 254 on August 21, reported Baker Hughes, the Texas-based well services company. There were 916 rigs a year ago.

Mixed Euro Zone, US Manufacturing Data Pressures Prices

The Euro Zone’s economic recovery from its deepest downturn on record stalled this month as pent-up demand unleashed by the easing of lockdowns in July dwindled, a survey showed. By contrast, U.S. housing and manufacturing survey data came in better than expected. Crude oil sellers pounced on the potentially bearish news on Friday, driving prices lower.

Daily Forecast

There’s not much going on today other than the hurricane forecast. However, we could see some follow-through buying in reaction to the rise in the rig count. On paper, a jump in the rig count should have been bearish because it typically leads to increased supply. However, in this case, it’s actually a positive development because it could be an early indication that U.S. producers are gaining confidence that demand is slowly returning.

As far as the hurricane is concerned, the shutting down of production facilities is potentially bullish although gains will be limited by the threat of a second prolonged COVID-19 wave.

Not only will traders be watching for oil production disruptions, they’re going to have to keep an eye on refining activity due to flood threats.