NEW YORK: Crude oil prices rose on Tuesday, headed toward a five-month high as U.S. producers shut most output in the Gulf of Mexico ahead of Hurricane Laura even as rising coronavirus cases in Asia and Europe capped gains.
Brent futures rose 79 cents, or 1.8%, to $45.92 a barrel by 11:33 a.m. EDT (1533 GMT). U.S. West Texas Intermediate (WTI) crude rose 55 cents, or 1.3%, to $43.17.
That puts both benchmarks on track to settle at their highest since March 5.
Energy companies cut production at U.S. Gulf Coast oil refineries after shutting 82% of the area’s offshore crude oil output as a double-storm assault threatened heavy rains and strong winds.
While the remnants of Tropical Storm Marco are expected to dissipate off the coast of Louisiana, the U.S. National Hurricane Center projected Hurricane Laura would strengthen into a major Category 3 storm over the next couple of days as it churns toward the Texas-Louisiana border.
“With around 2 million barrels of oil production being offline, it is somewhat surprising that crude is not significantly higher,” Edward Moya, senior market analyst at OANDA in New York, said.
Producers have shut more than 1.5 million barrels per day of Gulf Coast offshore oil production, according to a Reuters tally. That is nearly 14% of the nation’s total output.
“Overall, hurricanes may be limiting supply this week … but the market will soon again focus on the biggest hurricane of them all, COVID-19,” Bjonar Tonhaugen, head of oil markets at Rystad Energy, said.
Europe is seeing a rise in coronavirus cases, including re-infection. Two re-infections were reported in Europe and one in Hong Kong this week.
Elsewhere, U.S. and Chinese trade officials have reaffirmed their commitment to a Phase 1 trade deal, giving a boost to financial markets on Tuesday.
Meanwhile U.S. crude stockpiles likely fell for a fifth straight week, according to a Reuters poll.
(Additional reporting by Julia Payne in London and Jessica Jaganathan in Singapore; Editing by Barbara Lewis, Kirsten Donovan and David Gregorio)
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