Melbourne — Oil prices were in a holding pattern on Thursday as a massive storm in the Gulf of Mexico raced towards the heart of the US oil industry, forcing oil rigs and refineries to shut, with little effect expected on supply as oil stockpiles remain high.
US West Texas Intermediate (WTI) crude futures fell 4 US cents, or 0.1%, to $43.35 a barrel by 1.48am GMT, erasing Wednesday’s slight rise.
Brent crude futures for October, which expire on Friday, inched up 5c to $45.69 a barrel after falling 22c, or 0.5%, on Wednesday. The more active November Brent contract rose 2c to $46.18.
The threat from Hurricane Laura pushed the market higher earlier in the week, but the storm is not expected to affect supplies much because oil and product inventories remain high due to the coronavirus pandemic’s hit to fuel demand.
“It really depends on the damage sustained. But there’s a huge mitigation in that [crude] stockpile levels are at their highest in decades,” said Vivek Dhar, a commodities analyst at Commonwealth Bank.
US crude inventories stood at 507.8-million barrels at the end of the week to August 21, even after a larger-than-expected drop of 4.7-million barrels.
Laura intensified on Wednesday and is now forecast to bring heavy rains and catastrophic 240km/h winds that will drive ocean waters up to 64km inland, the US National Hurricane Centre said.
“It’s certainly packing a punch,” said National Australia Bank’s head of commodity research, Lachlan Shaw.
He said the market has not rallied hard on the storm threat as demand is less than usual and inventories are much higher than normal.
The hurricane was expected to make landfall at about midnight (5am GMT on Thursday).
Oil producers on Tuesday shut 1.56-million barrels per day (bpd) of crude output, or 84% of the Gulf of Mexico’s production, evacuating 310 offshore facilities.
Nine refineries that convert nearly 2.9-million bpd of oil into fuel, or about 15% of US processing capacity, were also shutting down.