Oil prices rose sharply on Wednesday morning. It also managed to reach its maximum values, which were last recorded at the beginning of March of this year. This was observed due to the storms in the Gulf of Mexico, which threaten the operation of oil-producing stations and have already paralyzed about 85% of capacities.
At the moment, forecasts warn that the next hurricane, Laura, is expected sometime soon now and advised the public to take precaution as the hurricane is expected to be destructive compared to the first one. According to preliminary forecasts, its capacity may reach the third category. The United States National Hurricane Monitoring Center says it will rage with devastating force on the coast of Texas and Louisiana by tonight or tomorrow morning. In any case, its consequences can be disastrous, therefore, the activities of oil production facilities are urgently suspended.
To date, 84% of oil production stations and 61% of gas producing and processing stations located in the Gulf of Mexico have temporarily closed down. Yesterday, the largest LNG terminal in Louisiana, Sabine Pass, has ceased operations. Several other oil refineries in the region are either shutting down completely or significantly reducing their operations during storms. All this has led to a significant increase in the price of crude oil and fuel which, at the same time, reached their maximum values for the last six months.
The price of futures contracts for Brent crude oil for delivery in October on the trading floor in London rose 0.33% or $ 0.15 on Wednesday morning, moving it to the level of $ 46.01 per barrel. Tuesday's trading turned out positively for the brand after closing with an increase of 1.6% or $0.73.
The price of futures contracts of WTI crude oil for delivery in October on the electronic trading floor in New York also significantly increased on Wednesday morning. It jumped 1.7% or $ 0.73, which sent the price level of $ 43.35 per barrel. Note that it closed Tuesday's trading with the exact same increase in price.
This significant increase in the price of both brands of crude oil allowed them to rise to their maximum value, which was last observed at the very beginning of March, even before the active phase of the coronavirus pandemic.
However, the factors that support oil prices at present, the hurricanes in the Gulf of Mexico, and limited supplies of raw materials, respectively, are rather short-term. In this regard, I would like to note that after the stabilization of weather conditions, everything will quickly return to its normal rhythm. As the summer season near its end, fuel demand will extremely be limited. This means that the recovery in demand for raw materials, which is taking place now, is also temporary, and it is not yet very clear what will happen next. Most analysts still assume that oil demand will be under pressure from the ongoing coronavirus pandemic, and market prices will inevitably be subject to correction. The only question is how strong this correction will be.
Experts also stressed that oil reserves are now in excess, so interruptions in supplies from the Gulf of Mexico will not affect the total volume in any way. Thus, supply shortages are more of a contrived problem.
According to preliminary data from the American Petroleum Institute, oil reserves in the US last week, ended August 21, fell by 4.52 million barrels. The official report regarding this matter is expected on Wednesday evening. The said report is expected to disclose the level of reserves of crude oil, gasoline and distillates, which will give a complete and real picture of everything that happens on the market.
