Oil Prices Rebound Amid Hurricane Concerns, Despite Weak Demand Outlook

Oil prices rose on Wednesday, recovering some of the sharp losses from the previous day, as concerns over Hurricane Francine disrupting U.S. output offset ongoing fears of weak global demand.

By 04:30 GMT, Brent crude futures had gained 34 cents, or 0.5%, reaching $69.53 a barrel, while U.S. West Texas Intermediate (WTI) crude futures were up 35 cents, or 0.5%, at $66.10 a barrel.

Both benchmarks experienced nearly $3 losses on Tuesday, with Brent hitting its lowest since December 2021 and WTI reaching its lowest point since May 2023. The decline came after OPEC+ revised down its global demand forecast for both 2024 and 2025.

“The market rebounded naturally after Tuesday’s substantial drop,” said Yuki Takashima, an economist at Nomura Securities, citing supply disruption fears from Hurricane Francine as a key factor supporting the price recovery. However, Takashima noted that concerns over weaker demand, particularly due to economic slowdowns in China and the U.S., would likely continue to exert downward pressure on prices.

Hurricane Francine Threatens U.S. Oil Output

Hurricane Francine, which has strengthened in the Gulf of Mexico, has prompted evacuations in Louisiana and forced oil and gas companies to halt production. Approximately 24% of crude oil and 26% of natural gas production in the U.S. Gulf of Mexico were offline due to the storm, according to the U.S. Bureau of Safety and Environmental Enforcement (BSEE).

OPEC Cuts Demand Forecasts

On Tuesday, OPEC revised its global oil demand growth forecast for 2024, cutting it to 2.03 million barrels per day (bpd), down from the previous estimate of 2.11 million bpd. The organization also trimmed its 2025 demand forecast to 1.74 million bpd from 1.78 million bpd.

Despite OPEC’s downward revision, the U.S. Energy Information Administration (EIA) forecasted record global oil demand growth this year, though it noted that production growth will be smaller than previously anticipated.

U.S. Crude Inventories Decline

U.S. oil prices received further support from a drop in crude inventories. The American Petroleum Institute reported that U.S. crude oil stocks fell by 2.793 million barrels for the week ending September 6, while gasoline inventories decreased by 513,000 barrels. Analysts had initially predicted a rise in crude inventories by 1 million barrels and a modest drop in gasoline stocks by 0.1 million barrels.

China’s Import Data and Bearish Sentiment

China’s daily crude oil imports reached their highest level in a year last month, according to customs data. However, imports were still 7% lower than a year ago, and year-to-date imports are down 3% from the previous year, fueling concerns over the country’s demand outlook.

Hiroyuki Kikukawa, president of NS Trading at Nissan Securities, remains bearish, citing fears over slowing global demand, including in China, as a factor that could continue to weigh on oil markets.