WTI US Crude Oil Talking Points:
- Hurricane Ida threatens oil & gas refineries, output from oil refineries off the Gulf of Mexico falls by approximately 95% or 1.7 million bpd
- Oil prices likely stalling in anticipation of the OPEC+ meeting on Wednesday
- US gasoline prices rise - power outages in Louisiana may continue for weeks causing further disruptions to production
Oil Struggles Below $70 Despite Production Disruptions Arising From Hurricane IDA
US crude oil (WTI) prices struggled to sustain the momentum of the recent uptrend despite further supply constraints that supported the bullish rally throughout last week.
As Hurricane Ida wreaked havoc along the Gulf of Mexico, oil refineries suspended production, wiping out approximately 95% from the Gulf’s total oil output, or approximately 1.72 million barrels per day.
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With heavy rains and winds sweeping throughout the coast of Louisiana on Sunday, the Louisiana Offshore Oil Port (LOOP), a deep water port that accounts for approximately 13% of the nation’s foreign oil, paused production. This is as the category 4 storm threatened to destroy the infrastructure of thelargest privately-owned import and export terminal in the United States.
Meanwhile, power outages in Louisiana left approximately 1.2 million homes and businesses in the dark. Further electricity disruptions are expected to hinder the ability for oil and gas production to return to normal levels once damages have been assessed and it is safe for workers to return to the rigs.
As oil traders continue to price in the potential for further disruptions, a rise in gasoline prices supported crude oil price action allowing bulls to maintain resilience above $68.00.
US Crude Oil (WTI) Price Action
With US Crude Oil currently trading below trendline resistance, the Commodity Channel Index (CCI) continues to edge higher towards the upper bound of the range, threatening overbought territory. If bulls are able to drive prices above both trendline resistance and the key psychological level of $70.00, further upside may prevail.
US Crude Oil (WTI) Daily Chart
Chart prepared by Tammy Da Costa using TradingView
Will OPEC+ Members Agree to increase production despite the spread of the Delta variant?
After agreeing to increase oil production by 400,000 barrels per day, OPEC+ (The Organization of Petroleum Exporting Countries and allies including Russia) will be meeting on Wednesday to discuss further increases as the spread of the Covid Delta variant dents oil demand.
With rising inflation already weighing on consumer sentiment, the outcome from the OPEC+ meeting may further assist in the catalyzation of price action for an imminent move.
--- Written by Tammy Da Costa, Analyst for DailyFX.com
Contact and follow Tammy on Twitter: @Tams707
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