Oil steadies as Hurricane Ida weakens, OPEC+ in focus

[August 30, 2021]  By Alex Lawler

LONDON (Reuters) - Oil steadied on Monday, giving up most of an earlier rally to a four-week high, as Hurricane Ida weakened after forcing shutdowns of U.S. Gulf oil production, and OPEC+ looked set to go ahead with a planned oil output increase.

Within 12 hours of coming ashore, the storm had weakened into a Category 1 hurricane. Nearly all offshore Gulf oil production, or 1.74 million barrels per day, was suspended in advance of the storm.

Brent crude was up 11 cents, or 0.2%, at $72.81 by 1135 GMT, having reached $73.69 earlier, the highest since Aug. 2. U.S. crude fell 30 cents or 0.4% to $68.44, having earlier touched $69.64, the highest since Aug. 6.

"Hurricane Ida will dictate oil's near-term direction," said Jeffrey Halley, senior market analyst at OANDA. "If Ida weakens and its path of destruction is lower than expected, oil's rally will temporarily lose momentum here."

While crude fell on anticipation of a quick supply recovery, U.S. gasoline was up almost 2% as power outages added to refinery closures on the Gulf coast and traders weighed the possibility of prolonged disruptions.

A pump jack operates in front of a drilling rig at sunset in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford/File Photo

"It's still early days," said Vivek Dhar, analyst at Commonwealth Bank of Australia. "Oil products, like gasoline and diesel, are likely to see prices rise more acutely from refinery outages especially if there are difficulties in bringing refineries and pipelines back online."

Brent has rallied 40% this year, supported by supply cuts by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, and some demand recovery from last year's pandemic-induced collapse.

OPEC+ meets on Wednesday to discuss a scheduled 400,000 bpd increase in its oil output, in what would be a further easing of the record output cuts made last year.

OPEC delegates say they expect the increase to go ahead, although Kuwait's oil minister said on Sunday it could be reconsidered.

(Additional reporting by Aaron Sheldrick; Editing by David Evans)

[© 2021 Thomson Reuters. All rights reserved.]

Copyright 2021 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.