Oil prices rise as storms cut US production

[NEW YORK] Oil prices rose on Tuesday as storms headed for the Gulf of Mexico shut more than half of the region's offshore production, with the more dangerous of the two storms expected to strike later in the week.

Brent crude settled at US$45.13 a barrel, gaining 78 US cents or 1.76 per cent, while US West Texas Intermediate crude settled at US$42.62 a barrel, rising 28 US cents or 0.66 per cent.

Energy companies shut more than one million barrels per day (bpd) of offshore crude oil supply in the US Gulf of Mexico and evacuated more than 100 production platforms because of the twin threat from Tropical Storms Marco and Laura.

Marco reached the coast Monday, and Laura was expected to accelerate to a hurricane and hit by midweek.

US petrol futures jumped roughly 7 per cent as refiners idled plants as a precaution.

"As is often the case within the energy complex, developments that are bullish to the products can be bearish to the crude futures as crude demand from the refiners is curtailed," said Jim Ritterbusch of Ritterbusch and Associates.

The storms could also curtail US exports. Brent's gains outpaced US crude on expectations that other countries might be able to boost exports while Gulf facilities are shut.

"Because the US is a major exporter, some of the supplies that we normally would be exporting are going to be stuck in the harbor," said Phil Flynn, senior analyst at Price Futures Group in Chicago. "That's going to offset what we're losing in production." Motiva Enterprises began preparations to shut its Port Arthur, Texas, crude refinery, the country's largest, sources told Reuters.

Total SA also cut production to minimum at its 225,500 bpd Port Arthur refinery and was preparing for a possible shutdown.

Also supporting oil prices was a Financial Times report that US president Donald Trump is considering fast-tracking an experimental Covid-19 vaccine being developed by AstraZeneca and Oxford University.

AstraZeneca denied having discussed an emergency use authorisation for its potential vaccine with the US government and called speculation of such use "premature".

REUTERS