U.S. West Texas Intermediate (WTI) crude oil saw most of its earlier gains erased after forecasts indicated that Hurricane Beryl would likely steer clear of major offshore production zones in the northern Gulf of Mexico, which is under U.S. regulation.
As of 10:20 a.m. CDT (1520 GMT), Brent crude futures had edged up by 24 cents, or 0.28%, to $86.84 per barrel. Meanwhile, WTI crude rose by 5 cents, or 0.06%, to $83.23 per barrel.
Earlier on Monday, WTI prices had surged by $1 to reach $84.38 per barrel amid initial concerns that Hurricane Beryl might significantly impact Gulf of Mexico oil production at a time when U.S. demand for motor fuels is on the rise. This followed a 2% gain in both benchmarks during the previous session.
However, updated forecasts allayed these fears, leading to a more tempered market response. “Markets realized that Beryl is not going to shut down significant offshore oil production,” said Phill Flynn, an analyst with the Price Futures Group. “While there may be some minor shutdowns, the impact on platforms will be minimal.”
Hurricane Beryl, currently classified as a dangerous Category 5 storm, is expected to weaken into a tropical storm by the time it reaches the Gulf of Mexico later this week, according to the U.S. National Hurricane Center.
In addition, U.S. gasoline demand is projected to increase as the summer travel season intensifies, coinciding with the upcoming Independence Day holiday. The American Automobile Association (AAA) has predicted a 5.2% rise in travel during this holiday period compared to 2023, with car travel specifically expected to increase by 4.8%.
Analysis
The initial surge in WTI prices reflected market jitters over potential disruptions to oil supplies due to Hurricane Beryl. However, the revised forecast reduced these concerns, underscoring the volatility and sensitivity of oil prices to weather events, particularly in regions critical to production.
For investors, the market’s reaction to Hurricane Beryl highlights the importance of staying informed about environmental factors that can affect commodity prices. While the current forecast suggests minimal impact, the situation could have provided an opportunity for short-term gains based on speculative trading. Those who capitalized on the early price increase could have realized significant profits before the market adjusted to the updated forecasts.
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