Oil prices climbed towards $46 a barrel on Wednesday, approaching the highest level since March, lifted by U.S. producers shutting most of their offshore Gulf of Mexico output ahead of Hurricane Laura and a report showing a fall in U.S. crude stockpiles.
Renewed fears over the coronavirus pandemic, which has eased demand and forced prices to record lows in April, limited gains following reports this week of patients being re-infected, raising worries over future immunity.
Brent crude oil futures added 8 cents, or 0.2% at $45.94 a barrel by 02:34 West Africa Time, while U.S. West Texas Intermediate crude was down 2 cents, or 0.1%, at $43.33 a barrel. The two benchmarks settled at a five-month high on Tuesday.
“Oil traders will be preoccupied with the hurricane today. Once the danger passes, demand considerations will come into focus again,” said Tamas Varga of broker PVM.
The U.S. energy industry was preparing on Tuesday for a major hurricane strike. Producers closed down 1.56 million barrels per day (bpd) of crude output, translating to 84% of the Gulf of Mexico’s offshore production and close to the 90% outage that Hurricane Katrina brought a decade and a half ago.
“We do see some support on the back of hurricane activity. The threat of being infected by the COVID-19 virus threatens a further recovery in oil demand,” Dutch bank ABN AMRO said in a report.
Oil also received a boost on Tuesday by U.S. and Chinese officials reaffirming their commitment to a Phase 1 trade deal. Additional support came from American Petroleum Institute (API) data showing U.S. crude stocks declined more than expected.
An unprecedented oil output cut by the Organisation of the Petroleum Exporting Countries and allies including Russia has helped to scale up Brent from 21st April’s year low below $16.
The U.S government’s Energy Information Administration report at 1430 GMT will be in focus to see if it confirms the API figures.
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