Oil Heads for Biggest Monthly Loss This Year Before OPEC+ Meets

Aug 31, 2021

(Bloomberg) Oil headed for the biggest monthly loss since October as investors weighed the prospect of additional OPEC+ production and the restoration of crude output in the U.S. after Hurricane Ida.West Texas Intermediate fell 0.9% in New York and is down about 7% this month. While Gulf of Mexico crude producers are expected to gradually resume service after Ida crashed ashore in Louisiana, local refineries may be slower to return.Data in Asia, meanwhile, continued to show the impact of the delta variant outbreak in recent months. China’s service sector contracted, while manufacturing figures narrowly missed estimates. Japan’s oil demand in July was down about 8% from 2019 levels, according to Bloomberg calculations from government data.

WTI is set for its biggest monthly slump since October 2020

The Organization of Petroleum Exporting Countries and its allies will meet on Wednesday to assess the global market and prospects for demand as the pandemic grinds on. The alliance forecasts a supply deficit this year, even as it continues to add production, though a surplus is expected to return in 2022.

Oil has endured a turbulent August, rising and falling on alternate weeks, as investors reacted to the latest twists in the global health crisis and swings in the U.S. currency. The U.S. benchmark crude has slumped this month, even though there has been a steady draw in stockpiles, and some nations including key importer China have managed to control their delta-variant outbreaks.

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There are “some pre-OPEC+ jitters and the realization that Hurricane Ida has a short term negative impact on demand, while supply should not be impacted,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S.

Prices:
WTI for October delivery lost 59 cents to $68.62 a barrel by 12:33 p.m. in London. Brent for October settlement fell 0.7% to $72.92 a barrel The November contract, which was the most active, fell to $71.68 a barrel.

Energy companies affected by Ida moved to restore operations. Colonial Pipeline Co. said it would restart gasoline Line 1 and diesel and jet fuel Line 2 from Texas to North Carolina on Monday evening.

Data on Tuesday showed that Beijing’s curbs on mobility to check the spread of the delta variant seemed to affect the pace of growth. The official manufacturing purchasing managers’ index fell to 50.1 from 50.4 in July, slightly lower than the median estimate in a Bloomberg survey of economists.

Related coverage:
Saudi Aramco may reduce the official selling price of Arab Light by 58 cents a barrel for October sales to Asia, according to a survey. China’s imports of Iranian crude in August remained firm, while flows from Venezuela dipped, according to Vortexa Ltd. More than a million customers in New Orleans and beyond face days or even weeks without electricity during the summer heat after Hurricane Ida devastated the power infrastructure.

Related coverage:

Saudi Aramco may reduce the official selling price of Arab Light by 58 cents a barrel for October sales to Asia, according to a survey.
China’s imports of Iranian crude in August remained firm, while flows from Venezuela dipped, according to Vortexa Ltd.
More than a million customers in New Orleans and beyond face days or even weeks without electricity during the summer heat after Hurricane Ida devastated the power infrastructure.