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Oil settles down 1% as U.S. refineries shut; Washington pushes OPEC to pump more

CommoditiesAug 31, 2021 05:10PM ET
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© Reuters. FILE PHOTO: Oil drills are pictured in the Kern River oil field in Bakersfield, California November 9, 2014. REUTERS/Jonathan Alcorn/File Photo

By Laura Sanicola

NEW YORK (Reuters) -Oil settled down 1% on Tuesday, posting its first monthly loss since March, as demand is expected to drop after Hurricane Ida shuttered U.S. Gulf refineries.

Brent crude futures for October, due to expire on Tuesday, settled down 42 cents, or 0.6%, at $72.99 a barrel.

U.S. West Texas Intermediate (WTI) crude futures settled down 71 cents, or 1%, at $68.50.

Both benchmarks posted their first monthly losses since March, even though they are not far from July highs. Brent lost 4% in July while U.S. crude fell 7%.

Hurricane Ida, which made landfall in the United States on Sunday as a Category 4 hurricane, knocked out at least 94% of offshore Gulf of Mexico oil and gas production and caused "catastrophic" damage to Louisiana's grid.

Prices were pressured by concerns that power outages and flooding in Louisiana after Hurricane Ida will cut crude demand from refineries.

About 1.7 million barrels per day (bpd) of offshore oil production was shut, but that output may resume more quickly than many refining operations along the Gulf that lost power. Analysts at FGE said in a Tuesday note they expect roughly three-quarters of offshore output to resume by the end of the week.

OPEC and allied producers in OPEC+ had agreed to add 400,000 bpd to monthly supply until the end of December. Sources told Reuters the group is likely to maintain that plan despite U.S. pressure for more output..

OPEC's own data showed the market will face a deficit until the end of 2021 but then flip into a surplus in 2022.

"It would hurt OPEC+'s credibility to change the terms after only one month," said Bob Yawger, director of energy futures at Mizuho.

The Colonial Pipeline - the largest U.S. fuel line to the East Coast - restarted its main gasoline and distillate lines on Tuesday after shutting them ahead of the storm, but some refineries are reporting damage to their plants.

Royal Dutch Shell (LON:RDSa) Plc said it found evidence of building damage at its 230,611 barrel-per-day (bpd) Norco, Louisiana, refinery, a company spokesman said on Tuesday.

"If refiners recover capacity in two to four weeks, then we should be OK. Beyond that, we will be driving inventory levels very low and prices may start to react meaningfully higher,” said Rebecca Babin, senior energy trader at CIBC Wealth.

U.S. crude stocks fell by 4 million barrels, while gasoline inventories rose by 2.7 million barrels and distillate stocks fell by 2 million barrels, according to two market sources, citing American Petroleum Institute figures on Tuesday.

Official inventory data from the U.S. Energy Information Administration is expected Wednesday.

Oil settles down 1% as U.S. refineries shut; Washington pushes OPEC to pump more
 

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Comments (11)
Kelly Mayer
Kelly Mayer Aug 31, 2021 7:55PM ET
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They will not increse production. Winter covid lockdowns are coming. Just read the graph 9n case and mortality numbers. Its gonna be nasty. Its not by chance that reiters is already reporting an infection and hospitalization rise among the fully vaccinated
JonMichael Patrick
JonMichael Patrick Aug 31, 2021 5:20PM ET
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this is their opportunity to literally drown Texas oil companies... if they are smart they will do what Biden wants and go for the throat of Texas gulf based oil companies once and for all. you know Russia and others aren't going to want to back out of adding more oil...
ADX Line
ADX Line Aug 31, 2021 5:20PM ET
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That has been tried over and over. It never works. It is failed logic. The oil will still be in the ground. OPEC can flood the market and BK Texas oil companies but the oil will still be in the ground. As soon as OPEC thinks it has completed its mission prices rise again and the oil is still in the ground and someone will get it out. Your logic on this as well as OPEC's in the past never seem to understand that the oil would still be in the ground.
JonMichael Patrick
JonMichael Patrick Aug 31, 2021 5:14PM ET
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opec already adding lol...
Kelly Mayer
Kelly Mayer Aug 31, 2021 4:38PM ET
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Government is instructing US producers to dump their oil on roads and what not, to "help regulate prices".
Gail Goodman
Gail Goodman Aug 31, 2021 3:50PM ET
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Our "green" President continues to call for more oil.  It's laughable.
JonMichael Patrick
JonMichael Patrick Aug 31, 2021 3:50PM ET
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longterm plan is to *******Texas oil and then the price goes even higher than ever after... I believe that is the plan of Biden and I can't see opec + not taking this opportunity to flood the markets...
Gail Goodman
Gail Goodman Aug 31, 2021 3:50PM ET
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Vlad Lozovskiy
Vlad Lozovskiy Aug 31, 2021 12:59PM ET
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Who would listen to a total loser like Biden now....
eduff duff
eduff duff Aug 31, 2021 11:04AM ET
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Hoax.oil going up, not down
Steven Kemp
Steven Kemp Aug 31, 2021 8:15AM ET
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wouldnt it be better to encourage our companies to produce more snd make us independent and creat jobs
Steven king
Steven king Aug 31, 2021 8:15AM ET
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Yes it would make more sense, but when did the Biden administration ever make sense??
Chet Rowles
Chet Rowles Aug 31, 2021 8:15AM ET
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what a novel idea!
Kris GE
Kris GE Aug 31, 2021 8:15AM ET
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Wow, this would make way too much sense, and that is the problem for these mindless commies. Common sense is in short supply, when ideology comes first. This is how the countries gets ruined, and we have plenty of examples around the world.
Bipin Kochar
Bipin Kochar Aug 31, 2021 5:55AM ET
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The impact of Ida is marginal and the rigs will be back in full swing in a week or two. The real risk is however that Kuwait has indicated the planned production quota increase can be reconsidered (in light of lower demand) - which will compound the impact of the production loss from Libyan rigs due to maintenance issues.
Al Smith
Al Smith Aug 31, 2021 5:55AM ET
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The hurricane damage has not even been completely assessed.
Kaveh Sun
Kaveh Sun Aug 31, 2021 1:59AM ET
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If oil goes up, it is Ida too. These writers r laughable
Stephen Nnamdi
Stephen Nnamdi Aug 31, 2021 1:59AM ET
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hello kaveh, plz I'm a young African trader who needs help on the fundamental part of the global market... plz I would wish you help me.. thank you
gene morris
gene morris Aug 31, 2021 1:03AM ET
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can anyone tell me why supply destruction lowers the price of oil?
Joey Liu
Joey Liu Aug 31, 2021 1:03AM ET
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the oil is down whopping 0.5%, has to be some reasons
Rob jl
Rob jl Aug 31, 2021 1:03AM ET
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The supply is fine (crude oil not petroleum). It’s the demand that lowered because some of the main buyers of crude oil (refineries) were hit by the hurricane as stated in this article. Lower demand = lower price
Gail Goodman
Gail Goodman Aug 31, 2021 1:03AM ET
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Joey Liu  Now down another 1%.
 
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