Oil Rallies 4% On Hurricane Shut-Ins, US Inventory Draw, Weak Dollar

NEW YORK (Pakistan Point News / Sputnik - 29th September, 2022) Oil rallied on Wednesday as bulls in the market caught a break from weeks of losses after output shut-ins over a hurricane combined with friendly US inventory data and a weaker dollar send crude prices up 4% on the day.

Oil bulls also leveraged on expectations that global oil producing alliance OPEC+ will announce an output cut next week to try and put an end to the worst market selloff in two years.

New York-traded West Texas Intermediate (WTI), which serves as the US crude benchmark, settled at $82.15 per barrel, up $3.65, or 4.7%, on the day, to extend Tuesday's 2.3%. Combined, the two-day rally helped WTI rise just over 4% on the week, after a near 16% drop over three four previous weeks.

Brent, the London-traded global benchmark for oil, settled at $89.32, up $3.05, or 3.5% on the day, after Tuesday's 2.6% gain. For the week, Brent showed a gain of 2%, after a 15% plunge over four previous weeks.

"Oil is back above the $80 level on seasonal stockpiling, some resilience in the economy that are delaying recession risks, and mostly on expectations OPEC+ will cut production between 500k or 1 million barrels per day," said Ed Moya, analyst at online trading platform OANDA.

Oil prices have been up since Tuesday on reports of precautionary shutdowns in production on the Gulf of Mexico by energy companies fearing damage from Hurricane Ian. The Bureau of Safety and Environmental Enforcement said as of Wednesday some 157,706 barrels per day in production, amounting to 9.12% of the Gulf's output, had been shut-in.

The shut-ins were followed by news that crude oil stockpiles fell last week for their first weekly decline in four.

Crude stockpiles fell by 215,000 barrels during the week ended September 23, versus forecasts by industry analysts for a build of 2 million and against the previous week's rise of 1.14 million, the Energy Information Administration said in its Weekly Petroleum Status Report.

Prior to the decline, crude stocks had risen non-stop for three weeks, growing by nearly 12 million barrels.

US fuel inventories also fell last week, the report showed.

Stockpiles of gasoline fell by 2.422 million barrels last week against expectations for a build of 500,000. In the previous week, gasoline inventories rose by 1.569 million barrels.

Inventories of distillates - the oil variant required for making the diesel needed for trucks, buses and trains, as well as the fuel for jets - fell by 2.891 million barrels last week, versus forecasts for a build of 600,000. In the previous week, distillate stockpiles rose by 1.231 million barrels.

The Dollar Index, which pits the US Currency against the euro and five other rivals, hovered at 112.5 on Wednesday - down 1.3% on the day for its sharpest tumble since the 1.45% drop on June 16. A weaker dollar typically boosts commodity demand by reducing transaction costs for those using other currencies.