Crude prices climb as market eyes extended supply outlooks post-Ida

Crude futures moved higher Sept. 8 as a bevy of supply disruptions pointed to a tighter near-term production outlook.

NYMEX October WTI settled 95 cents higher at $69.30/b, and ICE November Brent was up 91 cents at $72.60/b.

"Despite the modest risk-off vibe on Wall Street, oil is not going lower as both supply and demand fundamentals support stable if not higher prices," OANDA senior market analyst Ed Moya said in a note.

Related content: EIA boosts late-2021 spot gas price estimates, as Ida, slower injections take toll

Fully 10 days after Hurricane Ida made landfall in southeastern Louisiana Aug. 29, 1.399 million b/d of Gulf of Mexico crude oil production remained offline as of Sept. 8, Bureau of Safety and Environmental Enforcement reported, comprising to 76.88% of the Gulf's total output.

To date, the storm has kept some 20.64 million barrels of crude in the ground since the first shut-ins were announced Aug. 28.

The impact on Gulf Coast sour crude prices has been stark. Sour crude Mars' differential to WTI reached a one-year high, with trades heard done on Sept. 7 and 8 at a $1.25/b and $1.50/b premium to the benchmark.

At WTI plus $1.50/b, that ties the high for the front-month Mars assessed value on Jan. 16 and Platts has not assessed the value stronger since Sept. 8, 2020, when it was at WTI plus $1.70/b.

While trading for USGC sours has remained fairly slim since the storm, trades that were heard being done were at very strong levels as traders and brokers said that sentiment is that the recovery process following Ida will take weeks or even months.

"Anything to do with Louisiana is in short supply," one crude broker said. "I think the destruction will make this a long, drawn out process."

NYMEX October RBOB settled up 21 points at $2.1321/gal, and October ULSD climbed 1.48 cents to $2.1364/gal.

US crude oil inventories are expected to tighten due to the Gulf of Mexico supply disruptions.

US commercial crude stocks declined 2.88 million barrels in the week ended Sept. 3, the American Petroleum Institute said Sept. 8, according to media reports. Analysts surveyed by S&P Global Platts Sept. 7 had called for a 7.4 million-barrel draw over the same period.

EIA trims crude demand, price outlooks

The US Energy Information Administration, in its September Short-Term Energy Outlook released Sept. 8, lowered by 240,000 b/d to 101.01 million b/d its global oil demand estimate for 2022.

The EIA said steady draws on global oil inventories allowed oil prices to rise in the past year after plummeting at the onset of the pandemic, but "growth in production from OPEC+, US tight oil, and other non-OPEC countries will outpace slowing growth in global oil consumption and contribute to" oil price declines in 2022.

The agency cut its 2021 estimate for WTI crude prices by 24 cents/b to $65.69/b and expects prices to fall further in 2022 to average $62.37/b. Similarly, the EIA trimmed its Brent crude spot price estimate for 2021 by 10 cents/b to $68.61/b, while maintaining its 2022 estimate at $66.04/b.