WTI Settles at 1-Month High as USD Weakens

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Bolstered by a rapidly weakening U.S. Dollar Index, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Thursday's session sharply higher amid reports offshore producers in the Gulf of Mexico are unable to restart operations due to logistical constraints to deliver supplies to mainland terminals. Government data reports over 90% of the regional crude production remains offline following Hurricane Ida.

The U.S. Bureau of Safety and Environmental Enforcement reported on Thursday approximately 93.55% or 1,702,566 barrels per day (bpd) of oil production in the Gulf of Mexico remains offline, an increase from 79.96% reported day prior. While unconfirmed, the data might suggest offshore operators continue to face logistical constraints in delivering supplies to onshore terminals, with significant damage reported to the Louisiana staging areas that act as critical arteries for offshore industry. Bank of America Global Research highlighted the closure of Port Fourchon -- a major energy hub that serves over 250 companies in the Gulf and stands as the onshore link between offshore pipelines and various crude terminals in St. James and Clovelly.

"While the impacts are ultimately transitory, the output is that the return of Gulf of Mexico production coming off record shut-ins stands to be more sluggish and a function of capacity to build up temporary staging and reroute logistics," said the analysts in a note to clients.

Offshore federal Gulf of Mexico crude oil production currently accounts for 16% of total U.S. crude oil production. Roughly 70% of offshore oil and gas production is located west of New Orleans.

Separately, U.S. Secretary of Energy Jennifer Granholm instructed the Strategic Petroleum Reserve to conduct an exchange with ExxonMobil Baton Rouge for 1.5 million barrels (bbl) of crude oil to alleviate any logistical issues of moving crude oil within areas affected by Hurricane Ida to ensure the region has access to fuel as quickly as possible to aid the recovery.

The government said, "The U.S. Department of Energy encourages refiners to prioritize refined products for the affected region, and remains committed to supporting those efforts through options such as the SPR."

On the economic data front, upbeat reading on U.S. unemployment claims for the final week of August and stronger-than-expected gains in factory orders sent stocks on Wall Street sharply higher, with Dow Jones Industrials gaining more than 130 points. The U.S. Dollar Index, meanwhile, eroded further against a basket of foreign currencies to finish the session at a four-week low 92.228.

The number of Americans filing first-time unemployment claims dropped to a pandemic-era low of 340,000 during the last full week of August, down 14,000 from the previous week's revised level, the Labor Department said on Thursday. Unemployment claims have been trending lower after briefly exceeding 400,000 in mid-July. The data offers further evidence that a resurgent Delta COVID variant and slowed consumer spending doesn't necessarily translate into increased layoffs.

Factory orders for manufactured goods came above market consensus at 0.4% increase, down from 1.5% jump in the prior month, according to the data U.S. Census Bureau.

Next, investors will shift their focus to the August employment report, on tap for an 8:30 a.m. EDT release Friday. Economists estimate U.S. employers added 720,000 new jobs to payrolls in August -- a modest deceleration from July, but the third straight month of robust gains after the pace of hiring cooled in the winter and spring.

On the session, NYMEX West Texas Intermediate October contract settled a penny below $70 bbl, up $1.40 from Wednesday's close, and Brent crude for November delivery advanced $1.44 to $73.03 bbl. NYMEX October RBOB futures rallied 5.26 cents to $2.1635 gallon, and front-month ULSD futures strengthened to $2.1677 gallon.

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

Liubov Georges