WASHINGTON (DTN) -- Nearby delivery oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange rallied in afternoon trade Thursday, with the U.S. crude benchmark climbing above $41 per barrel (bbl) to a five-week high. The gains came as Hurricane Delta, which is tracking toward the Texas-Louisiana coastline as a Category 2 storm, led to deeper production cuts in the offshore Gulf of Mexico. The market was also supported by news that Saudi Arabia is reportedly considering reversing plans to raise production early next year as global demand recovers slower than previously thought.
The Bureau of Safety and Environmental Enforcement reported Thursday afternoon that approximately 91.5%, or 1,693,232 barrels per day (bpd), of current oil production in the Gulf of Mexico has been shut-in as a result of Hurricane Delta, up from 80.42% a day ago.
DTN Weather forecasts Hurricane Delta will briefly reach Category 3 strength as it makes its way to the Louisiana-Texas coastline, with a storm surge likely to reach up to 11 feet. Landfall is forecast for Friday afternoon or evening.
Further boosting prices, Saudi Arabia is reportedly considering advocating to cancel plans by the Organization of the Petroleum Exporting Countries and Russia-led allies to raise production early next year as demand recovers slower-than-expected while Libya has brought back some of its crude output following months of civil unrest.
An OPEC+ accord calls for producers to wind down crude production cuts from 9.7 million bpd in May and 7.7 million bpd now to 5.7 million bpd on Jan. 1. Reports indicate the Saudis are reconsidering phasing down the cuts early next year because of a sluggish recovery in global oil demand, indicating a decision would be reached at an OPEC+ meeting on Nov. 30-Dec. 1.
In its most recent Monthly Oil Market Report in September, OPEC projected global oil demand to decline 9.5 million bpd this year to 90.2 million bpd and to recover 6.6 million bpd of the annual decline in 2021.
November West Texas Intermediate futures jumped $1.24 to settle at $41.19 per bbl Thursday, and ICE December Brent contract rallied $1.35 to a $43.34-per-bbl five-week-high spot settlement. NYMEX November ULSD futures surged 3.15 cents or 2.7% to $1.1923 gallon and November RBOB futures rallied 3.07 cents for a $1.2319-per-gallon settlement.
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