Weekly Recap: Oil Prices Rise on GoM Storm Disruptions, Fed Inflation Strategy
Crude oil prices gained this week as tropical storms in the Gulf of Mexico disrupted offshore production, creating concerns of potential fuel shortages. Data published this week also showed a greater-than-expected decline in U.S. crude oil inventories, which drove up prices further.
Tropical Storm Laura, which was expected to turn into a hurricane, has caused severe damage in Louisiana and Texas, claiming as many as 14 lives. Offshore oil & gas operators suspended operations and refiners shut plants earlier in the week as the region was threatened by tropical storms Marco and Laura. Prices gained on concerns that these closures may cause a fuel shortage in the U.S.
The near-month contract for WTI crude increased 1.49% to US$42.97 per barrel (/bbl) this week, while the Brent crude contract for October delivery rose 1.58% to US$45.05/bbl. Prices corrected in the second half of the week as it appeared that the worst of the storms had passed without causing any major damage to U.S. refineries.
On Wednesday, the EIA reported that U.S. crude inventories declined by approximately 4.7 million barrels in the week ended August 21st, exceeding market expectations of a decline of 3.7 million barrels.
Overall market sentiment was boosted further by a continued rise in share prices after the U.S. Federal Reserve on Thursday announced a new policy framework that would allow for a higher rate of inflation for some time in order to boost employment and stimulate the economy.