Francine Causes Investors to Reverse Course, Oil Claws Back Some Of Tuesday's Losses

Meanwhile, Rystad Energy says $60 oil won't last for long: File Image/Pixabay

Overlooked in the previous session, Hurricane Francine on Wednesday made a sizeable impact on crude traders, who feared the storm would cause lengthy production shutdowns as it moved relentlessly toward Louisiana.

In a complete reversal of Tuesday's trading behaviour, they also shrugged off reports of an increase in U.S. crude inventories (in the previous session they shrugged off Francine and focused on the prospect of reduced global demand, causing oil to plummet to the worst showing since December 2021).

Brent on Wednesday settled up $1.42 to $70.61 per barrel, and West Texas Intermediate settled up $1.56 to $67.31 per barrel.

Francine's approach has caused 39 percent of crude production and 49 percent of natural gas production in the Gulf of Mexico to be suspended; as for rising inventories, the Energy Information Administration reported an 833,000 barrel build to 419.1 million barrels in the week ending Sept. 6, against expectations for a 987,000 barrel rise.

Wednesday also saw fallout from the previous session's massive sell-off, with Citigroup Inc. analysts declaring that the drop was so severe there was no need for extra output from the Organization of Petroleum Exporting Countries (OPEC).

Max Layton, Citigroup's head of commodities research, said, "The market is trying to send a strong signal to OPEC that there's no room for any more barrels; our balances suggest that OPEC needs to cut a whole extra million barrels for the entirety of 2025 to balance this market."

Layton was referring to OPEC's plan to unwind its production cuts – which the cartel already publicly stated would be delayed due to market conditions.

Meanwhile, other pundits tried to determine where sentiment would lead the oil market next.

Claudio Galimberti, an analyst at Rystad Energy, told media that "Traders are anticipating a deteriorating demand outlook in China and also they are anticipating potentially higher supply coming into the market than we have forecasted so far.

"We are still relatively constructive; we don't think we're going to see $60 per barrel in a consistent manner for the next three months."

Also on Wednesday, an assessment of the consequences of the political standoff in Libya that recently caused widespread production shutdowns was made: according to Kpler data, the country's crude oil exports plummeted to 194,000 barrels per day (bpd) last week, an 81 percent plunge compared to the previous week.