Crude lower amid profit-taking, output cut on Hurricane Ida

Crude oil futures were lower during morning trade in Asia Aug. 31 as investors saw selling opportunities amid the impact of Hurricane Ida on production.

At 10:45 am Singapore time (0245 GMT), the ICE October Brent futures contract was down 46 cents/b (0.63%) from the previous close at $72.95/b while the NYMEX October light sweet crude contract was down 41 cents/b (0.60%) at $68.80/b.

"Crude oil prices pulled back slightly due to profit-taking and lingering viral concerns around the world," said DailyFX strategist Margaret Yang on Aug. 31, adding that the Chinese NBS manufacturing PMI came below expectations, underscoring mounting downward momentum the world's largest oil importer is facing.

Despite the fall, oil production remains to be heavily impacted by Hurricane Ida, causing prices to gain overnight. Companies have also closed as much as 1.7 million barrel/d, or 95.7%, of crude production, according to the Bureau of Safety and Environmental Enforcement.

Due to the damage from torrential rain, flooding and cyclonic winds, approximately 12% of the US total refining capacity has been shut, ANZ research analysts said in a note Aug. 31, adding that the damage to oil platforms in the Gulf of Mexico looks limited, which should result in a relatively rapid return to full production.

According to estimates from S&P Global Platts Analytics, about 2.2 million b/d of refining capacity was offline due to the storm as of Aug. 30, with majority of the plants without power from outside supplier Entergy.

However, UOB research analysts said Aug. 31 that Hurricane Ida was downgraded to a tropical storm on Aug. 30 and now further downgraded to a tropical depression as it moves inland, adding that the New Orleans-area storm defenses built after Hurricane Katrina have held up well and US President Biden vowed to continue providing federal support to Louisiana and Mississippi.

Meanwhile, all eyes will be on the upcoming OPEC+ alliance meeting to discuss production target on Sept. 1 amid the pressure from the US to increase crude supplies and rising number of COVID-19 cases globally.

"Investors are eyeing tomorrow's OPEC+ meeting for signs about the oil cartel's production plan. In view of a slowing global economic rebound and mutate viral strains, the likelihood for OPEC+ to stick to the current production level is rising," DailyFX's Yang said Aug. 31.