Oil fell on Tuesday after Hurricane Ida knocked out at least 94% of U.S Gulf Coast refineries. Investors are now closely watching oil prices, with Washington calling for OPEC to pump more crude.
Brent crude futures, the global benchmark for oil prices, fell 0.6% to $72.99 a barrel on Tuesday.
U.S. West Texas Intermediate (WTI) crude futures were down 0.8%, trading at $68.68.
Both benchmarks were on track for their first monthly loss since March but were still not far from their July highs when Brent rose to its strongest since 2018 and U.S. crude to its highest since 2014.
Hurricane Ida & its perils on oil
Since Ida made landfall as a Category 4 hurricane on Sunday, it’s left 1 million homes and businesses on the Gulf Coast without power. Southern Louisiana, in particular, is reeling from massive outages; it could be weeks before power is back.
Scott Olson/Getty Images
The storm knocked out at least 94% of offshore Gulf of Mexico oil and gas production and caused “catastrophic” damage to Louisiana’s grid. As such, oil prices were pressured by concerns that power outages and flooding in Louisiana will cut crude demand from refineries.
In July, the Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) agreed to gradually boost oil production by 400,000 barrels per day (bpd). The group is likely to maintain that plan despite U.S. pressure for more output.
OPEC predicts a supply deficit of 900,000 barrels per day for the rest of the year, thanks to resurgent demand as the economy recovers.
The group, however, posits that the market will flip back into a surplus of 1.6 million barrels per day in 2022 if OPEC+ continues raising output as planned.
The largest U.S. fuel line to the East Coast, the Colonial Pipeline, restarted its main gasoline and distillate lines on Tuesday after shutting them ahead of Hurricane Ida.
Some refineries are, however, reporting massive damage to their plants. Royal Dutch Shell Plc, for instance, said it found evidence of building damage at its 230,611 barrel-per-day (bpd) Norco, Louisiana, refinery.
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