Oil Prices Fall On Global Market, Nearing 2-week Lows As Concerns Shift To Hurricane Michael

Gulf of Mexico
An oil and gas drilling platform stands offshore in the Gulf of Mexico in Dauphin Island, Alabama, U.S., October 5, 2013
(Photo: REUTERS/Steve Nesius/File Photo)

In a much-desired development, prices of oil took a sharp decline on Wednesday following a big drop in stocks on Wall Street that is now nearing a two-week low amidst fears from global energy traders who are wary of the situation concerning the shrinking supply of Iranian crude due to the latest US sanctions.

Meanwhile, market analysts and watchers are attributing the sudden price fall to Hurricane Michael which is currently ravaging the southeastern parts of the country including Florida, Georgia, and some parts of North and South Carolina.

According to a Reuters report, the presently surging Category 4 hurricane was able to shut down some US-Gulf of Mexico oil output, which considerably lessens the crude stocks in the region.

As stated by the news agency, Brent crude LCOc1 futures fell $1.91, or 2.3 percent, settling at $83.09 per barrel, further enabling the global benchmark to post a 1.3 percent gain on Tuesday after it took a deep plunge earlier this week.

Meanwhile, the US West Texas Intermediate (WTI) crude CLc1 futures dipped at $1.79 to settle at $73.17 a barrel, registering a 2.4 percent loss.

Contributing Factors To Losses

Crude prices have seen extended losses in post-settlement trade which, as reported by the American Petroleum Institute, is a direct implication of the rising crude inventories by 9.7 million barrels to 410.7 million units.

The US Energy Information Administration (US EIA) has yet to release its official statement on the government's inventory data by Thursday, Oct.11.

Moreover, the US stock market slipped on Wednesday, with the S&P500 stock index citing the largest one-day fall since February of this year.

A Market Watch report meanwhile said that the drop on crude-oil futures on Wednesday may have something to do with the projected impact of Hurricane Michael. Apparently, traders have over-estimated the scope of damages that the storm may bring on the energy infrastructure in the Gulf of Mexico.

In a statement given to the industry-focused publication, the energy economist at WTRG Economics, James Williams, said that Hurricane Michael sure does carry a massive destructive force on its wake. However, it turns out to have spared the aforementioned oil production areas.

In this case, the shutdown on production will return to normal sooner than expected, as the platforms are once again brought back to operational status.

The National Hurricane Center (NHC) classified Michael to be an extremely dangerous storm packing maximum sustained winds of 155 miles an hour.

© 2018 Business Times All rights reserved. Do not reproduce without permission.