Crude oil rallies on tightening supply outlook, expected tropical storm in US

0325 GMT: Crude oil futures were higher in midmorning Asia trade Sept. 13 on concerns about tight US supply in the aftermath of Hurricane Ida and as Tropical Storm Nicholas is expected to begin moving up the Texas coast Sept. 13.

At 11:25 am Singapore time (0325 GMT), ICE November Brent futures was 43 cents/b (0.59%) higher at $73.35/b while the NYMEX October WTI contract was up 45 cents/b (0.65%) at $70.17/b.

"US oil industry struggles to get back on its feet following Hurricane Ida. More than 1m b/d of capacity are still offline, nearly two weeks after the storm hit the Gulf of Mexico," ANZ analysts said Sept. 13.

As of Sept. 10, 1.207 million b/d, or 66.36%, of US Gulf of Mexico crude oil production remained offline, according to the Bureau of Safety and Environmental Enforcement.

Further, Tropical Storm Nicholas was seen churning through the US Gulf Coast Sept. 12, heading for an expected landfall along the Texas shoreline by late-Sept. 13.

Nicholas is forecast to approach the middle of Texas coast as a strong tropical storm, and it could be near-hurricane intensity if it moves to the right of the forecast track and remains over water longer, according to a Sept. 12 note from the National Hurricane Center.

NYMEX October RBOB was up 1.77 to settle at $2.1717/gal, and October ULSD rose 1.15 cents to $2.1575/gal.

Elsewhere, market watchers were observing the situation in Libya, where protests brought about by a power struggle between Oil Minister Mohamed Oun and the chairman of state-owned National Oil Corporation Mustafa Sanalla threatened to take a large chunk of capacity offline.

"In a worst-case scenario, a Libyan disruption could take up to 800,000 b/d of eastern exports off the market, at least temporarily, with another 300,000 b/d from the west at risk if things deteriorate markedly," S&P Global Platts Analytics said in a note.

Sharing a similar sentiment, ANZ analysts said the disruptions arising in Libya could see more than 1.2 million b/d disrupted.

The outages have already seen large inventory drawdowns, with US stockpiles falling 1.53 million barrels the previous week.

Stocks data from the US Energy Information Administration released Sept. 9 reflected the Ida impact in the near term. Crude inventories fell 1.53 million barrels to 423.87 million barrels for the week ended Sept. 3, around 6% below the five-year seasonal average, while gasoline stocks saw a 7.2 million-barrel drop to 220 million barrels, leaving inventories 4% below the five-year seasonal average.