Oil Price Fundamental Daily Forecast – Supported by Uncertainty Over Hurricane Impact, OPEC+ Production Rise

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging higher on Friday amid fresh worries about supply disruptions as energy companies began evacuating oil platforms and shutting down production in the Gulf of Mexico ahead of a possible hurricane strike over the weekend.

At 10:03 GMT, October WTI crude oil is trading $68.41, up $0.63 or +0.93% and October Brent crude oil is at $71.91, up $0.84 or +1.18%.

For the week, WTI is headed for a weekly gain of more than 9%, which would be its strongest rise since October 2020. Brent is on track for a rise of about 10% this week, its biggest weekly jump since June 2020.

In addition to the hurricane worries, there are growing expectations OPEC+ might resist raising output given the recent Delta variant impact over crude demand. This could become a heated debate because about two weeks ago, OPEC stuck with its demand forecast into the end of the year and early 2022.

Production Stops on Offshore Platforms

According to Reuters, energy companies started airlifting workers from Gulf of Mexico oil production platforms on Thursday and BHP, BP and Shell said they had begun to stop production at offshore platforms as a storm brewing in the Caribbean Sea was forecast to barrel through the Gulf on the weekend. Chevron said its production remained at normal levels on Thursday, while Occidental Petroleum and Hess Corp said they are monitoring weather conditions.

Gulf of Mexico offshore well account for 17% of U.S. crude oil production and 5% of dry natural gas production. Over 45% of total U.S. refining capacity lies along the Gulf Coast, Reuters said.

Exxon Mobil Corp said it was preparing its 520,000 barrel-per-day (bpd) Baton Rouge, Louisiana refinery for severe weather, but operations were normal on Thursday.

Phillips 66 operations at refineries in Lake Charles and Alliance, Louisiana, “will be adjusted based on the storm’s progression,” spokesman Bernardo Fallas said.

OPEC+ May See No Need for Supply Hikes at September Meeting

OPEC+ agreed in July to boost output by 400,000 barrels per day a month starting in August until its current oil output reductions of 5.8 million bpd are fully phased out.

However, in early August, two of the OPEC+ sources said the latest data from OPEC and the International Energy Agency (IEA) also indicated there was no need for extra oil.

Concerns about the spread of the delta variant around the world and the effects this will have on oil demand and prices may encourage OPEC+ to refrain from making any production increases in September.

The prospect of less supply hitting the market could help to underpin prices over the near-term.

Short-Term Outlook

Short-sellers are covering ahead of the hurricane because of fear of the unknown. As of early Friday, traders don’t know the size of the Hurricane and wear it will strike. They need to know this so they can assess the impact of any potential damage to the platforms and future demand. This is also likely to determine whether we’re looking at a short-term or longer-term event.

Prices could glide higher throughout the session until traders get clarity. However, keep in mind that prices could retreat quickly if the hurricane avoids the major production facilities.