Oil rises over 10% and Hurricane Ida supports crude

Oil rises over 10% and Hurricane Ida supports crude

Oil rises over 10% and Hurricane Ida supports crude

Oil rises over 10% and Hurricane Ida supports crudeWorld oil prices rose 10% over the week,
the strongest weekly gain since May 2020. 

Evest follows developments in the oil trading market in the following report: 

West Texas Intermediate crude futures jumped 10.6% to $68.74 per barrel for the fourth and final week of August,
the highest closing since August 12 and the largest weekly rise since June 2020.

Why did oil rise strongly last week?

One reason for the rally is that oil companies in the Gulf of Mexico began closing production before Hurricane Ida,
which is expected to hit the coast early next week, protecting mining bases. 

This storm has been classified as devastating like Hurricane Laura Katrina.

In the past, Hurricane Katrina destroyed five states along the Gulf of Mexico,
cut oil supplies by 1.53 million barrels per day, and continued for weeks on end.

In 2020, Hurricane Delta also led companies to cut their production by 1.69 million barrels per day.

Latest coronavirus outbreak

An additional factor was that traders remained confident that fuel demand would return,
once China managed to curb the latest coronavirus outbreak and Pfizer Bionic Corporation obtained full approval for the Covid-19 vaccine from the Food and Drug Administration.

However, concerns about growing delta boom cases still stand, with some countries in the Asia-Pacific region,
including Australia, Japan, and New Zealand, imposing new restrictions to combat the outbreak of the new pandemic.

Crude oil prices rose sharply this week and, according to experts, they are expected to rise in the future.

The sharp increase also reversed last week’s recession.

At the time, West Texas Intermediate crude fell 9% and Brent crude 7.6%,
simultaneously marking the worst week since October last year.

“Traders are pushing up crude oil prices in anticipation of production disruptions in the Gulf of Mexico and expectations that OPEC+  will refuse to increase production given the risk of the spread of the coronavirus Delta variant, which could weaken demand for crude oil,” said Edward Moya, an analyst at OANDA. 

The Gulf of Mexico accounts for about 17% of crude oil production in the United States. 

the US Bureau of Environmental Safety and Environmental Enforcement

According to a report by the US Bureau of Environmental Safety and Environmental Enforcement,
crude oil producers have shut down 91% of their production in the Gulf of Mexico since last Saturday, as Hurricane Ida approached.

The fire at an oil platform in the Gulf of Mexico on Sunday forced the Pemex Group to stop operating 125 wells in the area.

Pemex’s president announced a return to normalcy on August 30.

But production in the Gulf of Mexico may also be disrupted by the ninth climate event of this season, Ida.

Karsten Fritsch, an analyst at Kommersbank, noted that on the U.S. side of the Gulf, “several oil companies are starting to evacuate their platforms and suspend production” because of this storm, which will turn into a hurricane on Sunday.

In addition, the number of oil rigs operating in the United States in the week ending August 27 increased by five units to 410 units,
according to Baker Hughes Oil Field Services. 

The United States dollar falling also helped boost crude oil prices.

The US Federal Reserve Chairman Jerome Powell’s statement that gradual decline
was not linked to an increase in interest rates caused the US dollar to fall. 

Powell said it is going to decline at the end of this year, but when the decline ends,
interest rates won’t be raised immediately.

Meanwhile, Matt Maley, strategist at Miller Tabak, finds that crude oil prices are 50% likely to rise based on technical analysis.

“Crude oil appears to be a golden crossover pattern on the weekly chart,” Mali said, as reported by CNBC International, Thursday.

The golden cross occurs when the smaller moving average (MA) crosses the average of the larger moving from bottom to top.

In this case, the 50-day moving average intersects the 200-day moving average on the weekly chart.

Mali said that since 2009, there have been only 3 gold intersections, followed by a sharp increase in prices, by about 20% to 50%.

Last week trading days

Light West Texas Intermediate crude closed at $68.67 per barrel,
and world benchmark Brent crude was at $71.67 during the week.

At the end of the last session of the week, the price of West Texas Intermediate crude jumped 2.3%, and Brent oil rose by 2%.

“Between Storm Ida, burning a rig in the Gulf of Mexico, and improved demand in the US and Asia,
everything coincided with a very positive week,” James Williams of WTRG Economics told AFP.

The crucial market event will be held on Wednesday with the meeting of OPEC +,
an organization made up of members of the Organization of the Petroleum Exporting Countries (OPEC) and ten allies.

The group should assess its current policy, defined on July 18,
of continuing to increase production slightly after cutting it dramatically last year to counteract lower demand and prices,
in the midst of the coronavirus pandemic.

OPEC has taken a prior decision to gradually increase production according to the state of the general market,
which it has recently introduced after production cuts to support prices,
after the major crisis that the oil market was exposed to as a result of the Coronavirus. 

The COVID-19 has been affecting the commodity’s performance for nearly two years,
with the aviation sector, one of the largest affected sectors by the virus has been affected by oil.

Oil rises over 10% and Hurricane Ida supports crude

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