DTN Oil

WASHINGTON (DTN) -- Nearby delivery month oil futures on the New York Mercantile and Brent crude traded on the Intercontinental Exchange reversed higher in overnight trade on anticipation that Tropical Storm Ida, currently tracking towards Louisiana Coast, disrupts Gulf of Mexico oil production, with forecasts indicating an increased likelihood for the storm to strengthen into a Category 3 hurricane prior to its landfall on Sunday.

Near 9:30 a.m. EDT, NYMEX October West Texas Intermediate futures rallied $1.45 or 2% to $68.88 barrel (bbl), and Brent crude for October delivery advanced $1.35 to trade near $72.38 bbl. NYMEX September ULSD gained 1.59cts to $2.0991 gallon and September RBOB futures rallied to $2.2840 gallon.

U.S. energy companies on Thursday began shutting down offshore facilities in the Gulf of Mexico and evacuating workers in preparation for the storm. BP, BNP and Shell said they have shut in some production at the offshore oil platforms, while Chevron's production remained at normal levels as of Thursday. Occidental Petroleum and Hess Corp said they are monitoring weather conditions.

Meteorologists at DTN Weather forecast a fast-moving storm will likely make landfall across the central Gulf Coast as a Category 3 hurricane, packing winds of up to 111 miles per hour. Louisiana Governor John Bel Edwards has declared a state of emergency due to the potentially life-threatening storm surge and called on residents to make necessary preparations. A hurricane watch stretches from Cameron, Louisiana, to the Mississippi-Alabama state line, including the New Orleans metro area.

Aside from the developing hurricane, traders also watch for signals of potential policy shift at the Federal Reserve annual symposium at Jackson Hole, Wyoming, where Chairman Jerome Powell is set to deliver a keynote address today. Powell may not provide tapering details during his virtual address but could lay out the roadmap for easing the pace of monthly bond purchases before the end of the year.

President of Kansas City Federal Reserve Esther George told CNBC Thursday morning that "given the progress we've seen," Fed tapering is "appropriate," though she didn't specify when she thinks it should start.

"When you look at the job gains, we saw last month, the month before, you look at the level of inflation right now, I think it would suggest that the level of accommodation we're providing right now is probably not needed in this scenario," she said. "So I would be ready to talk about taper sooner rather than later."

In terms of the labor market, weekly initial jobless claims came in at 353,000, the Labor Department reported Thursday, a slight increase from the prior week's 349,000 and more than the 350,000 estimates from economists.

The incoming data is critical for the Federal Reserve's decision on how and when to tightened monetary policy.

Global stocks steadied after Thursday's retreat triggered by Bank of Korea decision to pull back fiscal support for the economy despite heightened risks tied to the COVID infections. BOK's decision could cast a different light on Friday's speech from Fed Chairman Jerome Powell, although market consensus appears to have tilted towards a more dovish speech from the Fed chair.

Liubov Georges can be reached at liubov.georges@dtn.com