Oil prices jump to highest in nearly 3 weeks

NEW YORK – Oil prices had their first biggest gain in nearly three weeks yesterday, with benchmark crude futures rising more than 2% on concerns about potential damage to offshore US energy production facilities from the start of the Atlantic hurricane season, reported Sputnik.

Fears that the so-called Hurricane Ian might pulverise oil-producing platforms on the US Gulf Coast of Mexico prompted oil super-majors Chevron and BP to evacuate their facilities there, triggering the biggest rally in crude since September 9.

New York-traded West Texas Intermediate, which serves as the US crude benchmark, settled at US$78.50 a barrel, up US$1.79, or 2.3%, on the day.

Brent, the London-traded global benchmark for oil, settled at US$86.27, up US$2.21, or 2.6%, on the day.

Before yesterday, crude prices had experienced a torrid selloff from the combination of super-sized rate hikes by the Federal Reserve, recession worries and the dollar at 20-year highs. A strong dollar is an anathema to commodities priced in the currency, including crude, as it raises transaction/acquisition costs for commodity traders using the euro and other currencies.

Oil prices still came off yesterday’s highs after Federal Reserve Bank of St. Louis President James Bullard cautioned that the United States remained at the risk of a recession from its worst inflation in over 40 years.

“Crude prices are attempting to stabilise alongside most risky assets as the global recession fear-driven selloff is slowly getting fully priced in,” said Ed Moya, analyst at online trading platform Oanda. “The oil market could see another drop if risk aversion quickly returns, (although) the current tightness should prevent a drop below the mid-US$70s.”

Notwithstanding yesterday’s advance, WTI is down 40% from its March high of around US$130, which had come a fortnight after the outbreak of the Russia-Ukraine war.

The US crude benchmark remained almost 40% lower from its March highs of around US$130. It was also down more than 12% on the month and 26% off for the July-through-September period, marking its first quarterly decline in two years.

Brent, meanwhile, remains some 38% off from its March peak of almost US$140. It is also 10% lower on the month, and off 25% for the third quarter. – Bernama, September 28, 2022