Oil futures experienced a rollercoaster ride on Monday, initially rising but later falling as a potential hurricane threatened the U.S. Gulf Coast, adding to the existing concerns about global oil demand.
At the start of the trading day, Brent crude futures rose by 0.23% to $71.22 a barrel, while West Texas Intermediate crude futures gained 0.28% to $67.86 a barrel. This brief rebound was attributed to fears that the approaching hurricane could disrupt oil production and refining operations in the U.S. Gulf Coast, a region that accounts for a significant portion of U.S. refining capacity.
Further contributing to the early gains was the ongoing supply disruption in Libya, where political unrest has led to production cuts. Libya’s National Oil Corporation (NOC) declared force majeure on several crude cargoes loading from the Es Sider port, highlighting the vulnerability of global oil supply to geopolitical events.
However, as the day progressed, the initial optimism faded, and oil prices began to slide. This downward trend was attributed to concerns about weak Chinese demand and persistent global oversupply. Analysts pointed out that the larger conversation surrounding oil prices remains focused on the uncertainty surrounding demand and the effectiveness of OPEC+’s strategies to manage supply.
Several market participants expressed their bearish outlook on oil prices. Trading houses Gunvor and Trafigura anticipate oil prices to hover between $60 and $70 a barrel, citing the sluggish Chinese demand and oversupply as key factors. Morgan Stanley also lowered its Brent price forecast for the fourth quarter from $80 to $75 a barrel, indicating a cautious outlook for the near future.
The impact of the fluctuating oil prices was evident in the performance of oil-related companies and exchange-traded funds (ETFs). Exxon Mobil Corporation, Chevron Corporation, and Marathon Oil Corporation saw gains in early trading, but the positive sentiment was short-lived. Meanwhile, ETFs that hold oil stocks, such as the United States Oil Fund LP, ProShares Ultra Bloomberg Crude Oil, and United States Brent Oil Fund LP, experienced declines.
As the hurricane threat continues to loom and concerns about demand persist, oil prices are likely to remain volatile in the short term. The outlook for the future of oil prices will depend on a complex interplay of factors, including the severity of the potential hurricane, the resolution of the Libyan political situation, and the pace of global economic recovery.
