Hurricane Ian Gives Oil Prices A Rebound, Likely Short-Lived

Meanwhile, Goldman downsizes price forecasts but remains bullish: File Image/Pixabay.

There's nothing like a devastating weather event to energize bearish sentiment in the oil sector, and while it's unlikely Hurricane Ian bearing down on Florida will cause any long-term bullish trends, on Tuesday it served to propel crude prices up by about $2 per barrel.

After offshore oil producers said they were monitoring Hurricane Ian as the storm shut-in about 11 percent of production in the U.S. Gulf of Mexico, Brent settled up $2.21 at $86.27 per barrel, and West Texas Intermediate settled up $1.79 at $78.50.

But not all producers are staying low: BP on Tuesday said it would redeploy offshore personnel to the Na Kika and Thunder Horse platforms after determining conditions were safe to return.

Sure to influence oil traders in the near future is an October 5 meeting of the Organization of the Petroleum Exporting Countries and allies (OPEC+), where it is widely believed the cartel will impose supply cuts in response to the steady oil price decline of the past few months.

Giovanni Staunovo and Wayne Gordon of UBS remarked, "Only a production cut by OPEC+ can break the negative momentum in the short run."

For his part, Ihsan Abdul Jabbar, oil minister for Iraq, said in a state TV interview that "We don't want a sharp increase in oil prices or a collapse…we entered a challenging period; global factors led to the decrease [in oil prices], most importantly lower growth and higher inflation rates."

Meanwhile, Goldman Sachs Group Inc. sharply lowered its oil price forecasts on increasing signs of a global economic slowdown: it predicted that Brent will average $100 per barrel in the last three months of 2022, below a prior forecast of $125.

The bank noted that the benchmark will probably average $108 in 2023, compared to the previously predicted $125.

Goldman analysts including Damien Courvalin and Callum Bruce said in a note on Tuesday, "A strong US dollar and falling demand expectations will remain powerful headwinds to prices into year-end.

"Yet, the structural bullish supply set-up - due to the lack of investment, low spare capacity and inventories - has only grown stronger, inevitably requiring much higher prices."