This week, the oil markets experienced a rebound following last week’s sharp sell-off. A combination of market reactions to hurricane disruptions in the Gulf of Mexico and evolving supply-demand concerns influenced prices. Here’s a breakdown of the key events in the oil markets from September 9th to 13th, 2024.
Price Movements
- Brent Crude & WTI Performance:
- West Texas Intermediate (WTI): WTI opened the week at $68.71 per barrel and rallied throughout the week, closing Friday at $68.97 after hurricane-induced supply concerns. The week saw a 3.86% increase, although WTI is still down 4% year to date.
- Brent Crude: Brent opened at $71.84 and closed at $71.97 per barrel, with a 1.93% gain by the end of the week. Year to date, Brent remains down by around 6.6%.
- Weekly Summary: Both benchmarks rebounded after the sharp declines from the previous week, driven largely by supply disruptions and hurricane-related outages in the Gulf of Mexico.
Key Market Drivers
- Hurricane Francine Impact:
- Hurricane Francine significantly affected the Gulf of Mexico, leading to more than 730,000 barrels per day of production being shut in. Oil futures rose sharply midweek, with WTI climbing over 2% on Wednesday and Thursday as Francine made landfall in Louisiana. Refineries, including Exxon’s Baton Rouge facility, had to reduce operations, but by Friday, many were coming back online with minimal damage reported.
- Ports such as Corpus Christi, Freeport Houston, and Sabine also shut down temporarily, but they began reopening by the week’s end, easing supply concerns.
- OPEC+ and Global Supply:
- OPEC+ delayed its planned production increase until December amid concerns over weak demand and falling prices. The group cut its demand growth forecast for 2024 for the second time in two months, reducing expected growth by 80,000 barrels per day (bpd). This revision, combined with weaker Chinese demand, continued to weigh on market sentiment early in the week.
- Despite the delayed production hike, traders are still cautious about oversupply, especially with China’s economic weakness impacting global demand.
- China’s Softening Demand:
- China, the world’s largest crude importer, has seen a steady decline in oil demand throughout 2024. Crude imports dropped by 3% for the year, driven by sluggish industrial activity and increased adoption of electric vehicles. Analysts have been closely monitoring China’s economic performance, which is key to the global oil demand outlook.
Market Sentiment
- Hurricane and Speculative Rebounds:
- After a sharp sell-off last week, the market saw a speculative rally midweek, with traders looking to “buy the dip” as oil futures rebounded due to the hurricane. Despite the overall bearish sentiment, supply disruptions and short-term production cuts provided temporary support to prices.
Inventory Data
- U.S. Crude Oil Inventories:
- The weekly inventory data from the U.S. Energy Information Administration (EIA) reported significant declines in crude stocks due to production shut-ins from Hurricane Francine. However, the market was less concerned about short-term fluctuations as long-term supply-demand imbalances persisted.
Looking Ahead
- Restoration of Operations:
- With refineries and oil platforms coming back online following Hurricane Francine, supply should normalize in the coming weeks, potentially putting downward pressure on prices. However, future tropical storms could still disrupt production temporarily.
- OPEC+ Outlook:
- The oil market will continue to monitor OPEC+’s production plans and compliance levels, particularly as the group plans to restore 2.2 million bpd of supply to the market by the end of 2025. As of now, uncertainty around global demand, especially from China, will remain a key factor shaping price movements.
Conclusion
The week of September 9th to 13th saw oil markets rebounding as supply concerns related to Hurricane Francine took place. Despite short-term price rallies, the broader outlook remains uncertain due to weak demand from China and potential oversupply from OPEC+. As the market moves into the final quarter of the year, traders will be closely watching OPEC’s next moves and China’s economic performance.