Hurricane Barry halts large portion of GOM oil output

By Saket Sundria and Alex Longley on 7/15/2019

SINGAPORE and LONDON (Bloomberg) --Oil traded near $60/bbl after a storm shut almost three-quarters of U.S. Gulf of Mexico crude production, even as lingering demand concerns continue to dent the outlook.

Futures rose 0.2% in New York. About 73% of crude output in the Gulf of Mexico was halted as of Sunday but some producers are preparing to return workers to offshore platforms as storm Barry weakens after making landfall. The shutdown countered the impact of China’s economy slowing to a three-decade low in the second quarter amid a prolonged trade dispute with the U.S.

Crude has gained this month because of shrinking U.S. stockpiles and rising tensions in the Middle East. The U.K. and its allies are considering beefing up their military presence in the Persian Gulf to deal with the threat to shipping posed by Iran. Still, there are concerns over the longer-term outlook for the oil market with OPEC warning of a glut in 2020 while the IEA pointed to a surprise increase in global inventories in the first half of this year.

“The basic message is that the second half of this year will see some depletion in global oil inventories, but this will be followed by a dismal 2020,” PVM Oil Associates analyst Tamas Varga wrote in a report.

West Texas Intermediate for August delivery added $0.12 to $60.33/bbl on the New York Mercantile Exchange. Brent for September settlement was $0.24 higher at $66.96/bbl on the ICE Futures Europe Exchange. The benchmark crude traded at a premium of $6.53/bbl to WTI for the same month.

Exxon Mobil and Chevron are among companies returning workers to their offshore platforms and restarting output in the Gulf of Mexico following storm Barry. The region accounts for 16% of total American crude oil production and under 3% of natural gas production, according to the Department of Energy.

The International Energy Agency said Friday that production cuts by OPEC and its allies failed to prevent the return of a surplus in the first half of 2019 as supply exceeded demand at a rate of 900,000 bpd. China’s gross domestic product rose 6.2% in the second quarter from a year earlier, below the 6.4% expansion in the first quarter.

Oil Market News

Hedge funds haven’t been this indifferent to crude in six years. Their combined bets on WTI crude rising or falling reached the lowest since March 2013 in the week ended July 9, according to U.S. Commodity Futures Trading Commission data released Friday.

France, Germany and the UK called on Iran to act responsibly and fully comply with commitments made in a 2015 international nuclear agreement amid rising tensions in the Persian Gulf.

There are no more oil tankers left inside the Persian Gulf flying the flags of the UK, the Isle of Man, or Gibraltar, according to ship-tracking data compiled by Bloomberg.

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