Oil Futures Gain on Bullish API Data, Libya Port Closures

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Following Wednesday's advance triggered by a potential supply disruption in Libya and the slow return of deep-water production in U.S. Gulf of Mexico, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange advanced in pre-inventory trade Thursday after industry data from the American Petroleum Institute reported across-the-board draws from U.S. commercial crude and refined product supplies in the week ended Sept. 3.

Near 7:30 a.m. ET, NYMEX October West Texas Intermediate contract gained $0.44 to $69.74 per barrel (bbl), and Brent crude for November delivery jumped above $73 bbl, advancing $0.52 in early trade. NYMEX October RBOB futures added 1.8 cents to $2.1491 gallon, and front-month ULSD futures gained 0.75 cents to $2.1439 gallon.

Operators in the offshore U.S. Gulf of Mexico managed to restore about 400,000 barrels per day (bpd) out of a total 1.8 million in daily production that was shut-in by the Hurricane Ida on Aug. 29. Ida has already kept about 20 million bbl of oil off the market, according to analysts, and should the disruption continue into next week that could well exceed 30 million bbl.

A combination of factors has likely contributed to the slow progress in restoring GOM production, including potential damage to underwater pipelines and widespread power outages at refineries and oil terminals across southeastern Louisiana that could preclude the facilities from receiving oil. Entergy -- the regional power supplier, said on Wednesday 62% of customers that lost power following the hurricane's landfall are now receiving power, with some parts of the transmission system requiring a total "rebuild." The utility has also received permission from the U.S. Nuclear Regulatory Commission to restart its 1.2 GW Waterford 3 nuclear plant that remained closed since Aug. 29, which should further boost electricity supplies across the region.

Many offshore operators have been able to return some personnel to platforms, with 73 remaining evacuated, about 13% of all platforms in the Gulf, according to the BSEE data.

The unprecedented supply disruption veered its head in weekly inventory data released by the American Petroleum Institute late Wednesday, showing domestic gasoline inventories decreased by a massive 6.414 million bbl in the week ended Sept. 3 compared with calls for a drop of 2.9 million bbl. API data also showed distillate inventories dropped 3.748 million bbl, above estimates for a 2.3 million bbl draw. Commercial crude oil inventories declined by 2.882 million bbl in the profiled week versus an anticipated 2.5 million bbl draw. Data show stocks at the Cushing, Oklahoma hub increased 1.794 million bbl.

Analysts estimate that large product draws last week are constructive in light of the 2.5 million barrels per day (bpd) in refining capacity initially knocked offline in Louisiana by Ida. On Wednesday, U.S. Department of Energy said that five refineries in Louisiana with roughly 1 million bpd of oil refining capacity remained shut, with all three refineries in the Baton Rouge area and one near New Orleans having initiated the restart process.

Aside from efforts to restore GOM output, traders are also monitoring escalating protests across Libya's eastern terminals triggered by a reported power struggle between Libya's oil minister Mohamed Oun and the chairman of state-owned National Oil Corporation Mustafa Sanalla. Demonstrators blocked loadings from the two key terminals of Ras Lanuf and Es Sider. A third set of demonstrations broke out at the port of Tobruk, whose gate also serves the nearby Marsa el-Hariga terminal.

Libyan crude production has recently hovered around 1.1 to 1.2 million bpd, but many expect output to be volatile in the lead-up to the presidential elections to be held on Dec. 24. The latest Monthly Oil Market Report from the Organization of the Petroleum Exporting Countries pegged Libya's oil production at 1.165 million bpd, up from 911,000 bpd in the fourth quarter of 2020.

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

Liubov Georges