Oil fell on Tuesday, with demand expected to drop after Hurricane Ida shuttered U.S. Gulf Coast refineries, and as OPEC nations readied for a Wednesday meeting, with the United States calling for the group to pump more crude.
Brent crude futures for October, due to expire on Tuesday, fell 42 cents, or 0.6%, to $72.99 a barrel by 2:00 p.m. EDT (1600 GMT)
U.S. West Texas Intermediate (WTI) crude futures were down 53 cents, or 0.8%, at $68.68.
Both benchmarks were on track for their first monthly loss since March but were still not far from their July highs, when Brent rose to its strongest since 2018 and U.S. crude to its highest since 2014.
Hurricane Ida, which made landfall in the United States on Sunday as a Category 4 hurricane, knocked out at least 94% of offshore Gulf of Mexico oil and gas production and caused “catastrophic” damage to Louisiana’s grid.
Prices were pressured by concerns that power outages and flooding in Louisiana after Hurricane Ida will cut crude demand from refineries.
About 1.7 million bpd of offshore oil production was shut, but that output may resume more quickly than many refining operations along the Gulf that lost power. Analysts at FGE said in a Tuesday note they expect roughly three-quarters of offshore output to resume by the end of the week.
OPEC and allied producers in OPEC+ had agreed to add 400,000 barrels per day (bpd) to monthly supply until the end of December. told Reuters the group is likely to maintain that plan despite U.S. pressure for more output.
“It looks like sticking to the plan from the last meeting,” an OPEC+ source told Reuters.
OPEC’s own data showed the market will face a deficit until the end of 2021 but then flip into a surplus in 2022.
The Colonial Pipeline – the largest U.S. fuel line to the East Coast – restarted its main gasoline and distillate lines on Tuesday after shutting them ahead of the storm, but some refineries are reporting damage to their plants.
Royal Dutch Shell Plc said it found evidence of building damage at its 230,611 barrel-per-day (bpd) Norco, Louisiana, refinery, a company spokesman said on Tuesday.
“If refiners recover capacity in two to four weeks, then we should be OK. Beyond that, we will be driving inventory levels very low and prices may start to react meaningfully higher,” said Rebecca Babin, senior energy trader at CIBC Wealth.