Oil Steady In Wake of Hurricane Nicholas
Oil ended the session little changed as investors tracked U.S. dollar movements and concerns faded around Hurricane Nicholas’ threat to crude supply in the U.S. Gulf of Mexico.
Futures in New York erased nearly all gains, yet still managed to close at the highest since early August on Tuesday. The dollar advanced, reducing the appeal of commodities priced in the currency. While Nicholas did not impact offshore output in the U.S. Gulf, storm-related power outages briefly shut the country’s largest gasoline pipeline that sends fuel from Houston to the Northeast.
U.S. crude futures have traded near $70 a barrel for most of this month. The International Energy Agency said on Tuesday that the world will have to wait until October for additional oil supplies as output losses from Hurricane Ida wipe out increases from OPEC+. Global oil demand has been falling since July as rising Covid-19 cases prompt mobility restrictions in Asia, according to the IEA.
Nicholas, which struck shore as a Category 1 hurricane and has since lost strength, had largely moved east from the Houston area by mid-morning local time, allowing refiners, chemical makers and other industrial concerns to assess the physical impacts of rain and wind.
The gasoline crack spread, a rough measure of the profit from refining crude into fuel, rallied about 3% on the temporary outage of Colonial’s Pipeline Co.’s gasoline pipeline. The company’s diesel pipeline is still shut.
- West Texas Intermediate for October delivery added 1 cent to settle at $70.46 a barrel in New York.
- Brent for November settlement rose 9 cents to end the session at $73.60 a barrel.
Meanwhile, China said it will make the first sale of oil from its strategic reserves on Sept. 24 after announcing the historic move last week. The initial auction will be for about 7.38 million barrels of crude, the National Food and Strategic Reserves Administration said in a statement Tuesday.
There are also signs of a stronger physical market, with Chinese companies buying grades from Brazil and Russia at higher premiums than a month earlier. The purchases come amid speculation that authorities are about to allocate more import quotas.
(With assistance from Alex Longley. © 2021 Bloomberg L.P.)
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