Hurricane Ida downgraded: crude oil markets slowly react to the news

 

The price of crude oil recorded a slight fall on Monday, perhaps at the news that the Hurricane Ida, which had been battering the US Gulf Coast on Sunday, has finally been downgraded to a tropical storm.

Although the strong winds can still cause mayhem, the impact on the ordinary lives appears to be gradually receding.

It is true that the major oil companies moved their staff away from the facilities as the tropical storm evolved into a category-4 hurricane and the production suffered to some extent.

Sensing a major disruption to the crude oil supply, the markets reacted in an understandable way – elevating the price. As the feared destruction did not take place, however, the price of crude oil just fell in the early hours on Monday morning.

As of 11:30 GMT, the price of WTI and Brent were $68.29 and $72.53, recording a loss of 0.76% and 0.30% respectively. It was a modest fall, though.

Facing the new development in the aftermath of the Hurricane Ida, analysts are eagerly awaiting the US crude oil inventory data this week, both by the API, American Petroleum Institute, and EIA, US Energy Information Administration, in order to gauge the trend in the consumption in the US, the world’s largest consumer.

As the threat of the tropical storm subsides, the worries over the spread of the Delta variant shows no sign of abating, not just in the US, but across the globe. In proportion to the rising infection levels, the tendency to secure borders has gone up by a few notches.

The European Union yesterday, for instance, added the US, along with Israel, from where visitors are not allowed to enter the member nations – a move that will not go down very well among the political circles in the US.

Both the US and Israel had an impressive track record in rolling out vaccines, yet the moves could not keep the outbreaks at bay.

The OPEC+, meanwhile, maintains an apparent united positon with regard to the increased production; it will not go down from 400,000 bpd, started in August, they say.

As for the US request for a production hike, the group has been vague; they haven’t put it into the dustbin of history either.

Since the US still is a major player in the oil realm, both as a producer and a consumer, OPEC+ has chosen to react cautiously to the request by the US.

By asking the OPEC+ to increase the production while discouraging the domestic producers to do the same with a few knee-jerk moves, the Biden administration has come under criticism from many quarters, including those who supported his election because of the green agenda.

The rise in price at the pumps, however, left the administration with no alternative other than doing the obvious – increasing the supply to address the demand.

Since there is no sign of collapsing the price of crude oil at present with the feared supply-glut, both producers and consumers must agree upon a formula to keep it at a sustainable level without disrupting the fragile recovery of the global economy.