Oil prices rose more than two per cent on Tuesday, supported by hurricane supply disruptions in the United States, but demand concerns loomed as energy industry forecasters predicted a slower-than-expected recovery from the pandemic.
Brent crude gained 92 cents, or 2.3 per cent, to settle at $40.53 a barrel, while U.S. West Texas Intermediate crude futures rose $1.02, or 2.7 per cent, to settle at $38.28 a barrel. Both contracts fell on Monday, according to Reuters.
Futures gained ahead of Hurricane Sally’s expected landfall on the US Gulf Coast. More than a quarter of US offshore oil and gas production was shut and key exporting ports were closed as the storm’s trajectory shifted east toward western Alabama, sparing some Gulf Coast refineries from high winds.
“Harsh weather events in the US cause some unpredictability about its oil production and that’s always good news for prices,” said Bjornar Tonhaugen, Rystad Energy’s head of oil markets.
The outlook for oil demand remained weak, capping price gains. The International Energy Agency trimmed its 2020 outlook by 200,000 barrels per day to 91.7 million bpd, citing caution about the pace of economic recovery.
“We expect the recovery in oil demand to decelerate markedly in the second half of 2020, with most of the easy gains already achieved,” the IEA said in its monthly report.
The agency said commercial oil stocks in the developed world hit an all-time high of 3.225 billion barrels in July, and cut its forecast for implied stock draws for the second half of the year.
The IEA’s demand revision aligns with forecasts from major oil industry producers and traders. OPEC downgraded its oil demand forecast and BP said demand might have peaked in 2019.
World oil demand will tumble by 9.46 million bpd this year, the Organisation of the Petroleum Exporting Countries said in a monthly report on Monday, more than the 9.06 million bpd decline OPEC expected a month ago.