Oil gains ground as U.S. Gulf of Mexico producers shut down 1.5 million barrels per day of oil production.
Oil Video 25.08.20.
U.S. Gulf of Mexico Producers Shut Down More Than 1.5 Million Barrels Per Day Of Oil Production
Yesterday, the double threat from Hurricane Marco and Tropical Storm Laura forced U.S. Gulf of Mexico producers to shut down more than 1 million barrels per day (bpd) of oil production.
Today, Tropical Storm Laura is forecasted to turn into a major hurricane while U.S. Gulf of Mexico producers have shut down more than 1.5 million bpd of oil production.
Not surprisingly, this event provided support to WTI oil prices which made an attempt to settle above the $43 level.
In the short term, the storm threat will continue to support oil prices. At the same time, traders may stay focused on longer-term problems like the long-lasting damage from the coronavirus pandemic.
The oil market will quickly get back to its previous state unless storms deal significant damage to infrastructure. At this point, more than 40% of U.S. Gulf of Mexico platforms have been evacuated as a precaution measure but no actual damage has been reported.
Optimism On U.S. – China Trade Deal Is Another Factor That Supports Oil Prices Today
U.S. and China have confirmed that the Phase 1 of the trade deal between the world’s biggest economies is progressing well. Unlike the hurricanes, the U.S. – China trade deal has a long-term impact on the oil market.
While U.S. and China have only managed to negotiate the first phase of the trade deal and the continuation of negotiations is under question due to deterioration of U.S. – China relations, the Phase 1 is still very important for the world economy and the demand for oil.
Any indications that the trade deal is falling apart would have immediately sent oil prices lower. For now, the market consensus is that the trade deal is safe until U.S. elections, and then analysts will adjust their forecasts depending on who wins.
Now that worries about the trade deal are out of the picture for a few months, oil traders will concentrate on the dynamics of supply/demand balance. API Crude Oil Stock Change report, which is set to be published today, will provide traders with a chance to evaluate the latest developments on the inventory front.
Vladimir is an independent trader and analyst with over 10 years of experience in the financial markets. He is a specialist in stocks, futures, Forex, indices, and commodities areas using long-term positional trading and swing trading.