Oil prices slipped on Wednesday after the IMF lowered its global growth forecasts, but markets were supported as Hurricane Michael moved toward Florida causing the shutdown of nearly 40 per cent of U.S. Gulf of Mexico crude production.
Brent crude LCOc1 was down 20 cents at $84.80 a barrel by 0915 GMT after a 1.3 per cent gain on Tuesday. U.S. light crude CLc1 was down 15 cents at $74.81.
“Oil prices have stabilized for the moment – between a real and a metaphorical storm,” said Fiona Cincotta, senior market analyst at City Index. “Hurricane Michael is powering ahead toward the Gulf of Mexico but it now seems likely to miss the main production areas there. On the other hand, Iran sanctions are only weeks away.”
The International Monetary Fund cut its global economic growth forecasts for 2018 and 2019 on Tuesday, raising concerns that demand for oil may also slump.
Trade wars and rising import tariffs are taking a toll on commerce, while emerging markets struggle with tighter financial conditions and capital outflows, the IMF said. But supply concerns are keeping the market on edge. In the United States, nearly 40 per cent of daily crude oil production was lost from offshore U.S. Gulf of Mexico wells on Tuesday because of platform evacuations and shut-ins ahead of Hurricane Michael.
Michael has strengthened into an “extremely dangerous” Category 4 hurricane, according to the latest advisory from the U.S. National Hurricane Center. Oil producers evacuated personnel from 75 platforms as the storm made its way through the central Gulf on the way to landfall on Wednesday in Florida.
Companies turned off daily production of about 670,800 barrels of oil and 726 million cubic feet of natural gas by midday on Tuesday, according to offshore regulator the Bureau of Safety and Environmental Enforcement.
Crude supply is also a concern in the Middle East. Iran’s crude exports fell further in the first week of October, according to tanker data and an industry source, as buyers sought alternatives ahead of U.S. sanctions that take effect on Nov. 4. Industry and government data on U.S. crude inventories will be delayed by one day this week because of a public holiday on Monday.
The American Petroleum Institute is due to release data on Wednesday while the U.S. Energy Information Administration is due to publishing on Thursday.