U.S. West Texas Intermediate and Brent crude oil futures are edging lower shortly after the New York opening, but still holding on to its weekly gains. Today’s price action suggests profit-taking is taking place ahead of the weekend or traders are concerned over valuations. Demand for riskier assets and commodities is also pressuring prices amid renewed concerns over the financial stability of China Evergrande.
Earlier in the session, oil prices jumped to a two-month high before retreating. None-the-less, the markets are headed for a third straight week of gains, supported by global output disruptions and inventory draws.
Despite today’s minor setback, oil prices are likely to remain supported for months due to disruptions in U.S. Gulf Coast production following Hurricane Ida and other storms.
US Oil Refiners Pick Iraqi, Canadian Crudes to Replace Storm Losses – Traders
U.S. oil refiners hunting to replace lost after a storm hit the U.S. Gulf of Mexico last month have been turning to Iraqi and Canadian oil, while Asian buyers have been pursuing Middle Eastern and Russian grades, analysts and traders said.
Royal Dutch Shell, the largest producer in the U.S. Gulf of Mexico, this week said damage from Hurricane Ida to an offshore transfer facility will limit Mars sour crude supplies into early next year. The grade is used heavily by U.S. Gulf refiners and companies in South Korea and China, the top two export destinations for Mars, Reuters reported.
The United States generally exports more than 3 million barrels per day (bpd) of oil, most from the U.S. Gulf Coast. With overall fuel demand rebounding to pre-pandemic levels, refiners will need to make up for the Mars shut-ins.
The loss of up to 250,000 bpd has some U.S. refiners seeking replacements for fourth-quarter delivery, especially Iraq’s Basra crude, traders said. Others received supplies of sour crude from U.S. storehouses.
Friday’s price action suggests the market is a little tired and ripe for a near-term setback. The move is not likely to trigger a major change in trend, but could lead to a break into a value area.
After a near-term pullback, we expect prices to rebound into new highs for the year on the back of inventory drawdowns, lower OPEC production and stronger demand in the Middle East.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire