Oil Prices Rise by 1% as Worries Grow Over Hurricane Impact on US Output

Oil prices increased by over 1% on Thursday, continuing a recovery driven by concerns regarding Hurricane Francine's effects on U.S. production, although a pessimistic demand forecast limited the extent of the gains.

By 0805 GMT, Brent crude futures for November had risen by $1.01, or 1.4%, reaching $71.62 per barrel. Meanwhile, U.S. crude futures for October climbed $1, or 1.5%, to $68.31.

Both contracts had surged more than 2% in the previous session due to the shutdown of offshore platforms in the U.S. Gulf of Mexico and disruptions to refinery operations following Hurricane Francine's landfall in southern Louisiana on Wednesday.

According to the offshore regulator, nearly 39% of oil and almost half of natural gas production in the U.S. Gulf of Mexico was offline on Wednesday, with 171 production platforms and three rigs evacuated.

Priyanka Sachdeva, a senior market analyst at Phillip Nova in Singapore, noted that the region contributes approximately 15% of U.S. oil production, and any production disruptions could lead to tighter supplies in the short term.

However, as the storm is expected to weaken post-landfall, market focus is shifting towards declining demand.

Charalampos Pissouros from brokerage XM remarked that the supply-side impact may be temporary, as the storm will eventually dissipate, raising concerns about the persistence of demand issues.

The Energy Information Administration (EIA) reported on Wednesday that U.S. oil inventories increased last week due to rising crude imports and falling exports.

Additionally, gasoline demand in the U.S., the largest oil consumer globally, dropped to its lowest level since May, with declines also noted in distillate fuel demand and refinery operations.

Despite the concerns surrounding Hurricane Francine, the medium-term outlook for WTI crude remains bearish, influenced by weak demand from China and fears of economic slowdown in the U.S., according to Kelvin Wong, a senior market analyst at OANDA.

Earlier this week, the Organization of the Petroleum Exporting Countries (OPEC) revised its projections for global oil demand growth downward for this year and also adjusted its expectations for 2025, marking the second consecutive reduction. 

As a result, both oil benchmarks experienced a significant decline on Tuesday following this announcement.