By Peter Nurse
Investing.com -- Oil prices rose Tuesday, bouncing from the previous session’s nine-month lows on the likelihood of reduced supply from Hurricane Ian and next week’s OPEC+ meeting.
By 08:55 ET (12:55 GMT), U.S. crude futures traded 1.9% higher at $78.17 a barrel, while the Brent contract rose 2% to $84.54.
Major crude producers are carefully studying the progress of a weather pattern making its way towards the Gulf of Mexico, a region that accounts for about 15% of U.S. crude supply, with the likes of BP and Chevron having already cut production at some offshore oil platforms.
Ian is currently classified as a category two storm, and is expected to become a major hurricane within two days, making landfall in Florida later this week.
This potential disruption of supply comes ahead of next week's meeting of the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+.
The group of top producers announced a modest reduction in output last month in an unsuccessful attempt to staunch the oil price slide, and may be forced into something more substantial this time around.
A cutback of up to 1 million barrels may be necessary to “stem the downward momentum in prices,” analysts at JPMorgan said, in a note earlier this month.
Crude prices have slumped of late, falling around 15% this month alone, rattled by a rapidly strengthening dollar and fears of a pronounced economic slowdown as central banks across the globe hiked interest rates to combat soaring inflation.
That said, “the structural bullish supply set-up - due to the lack of investment, low spare capacity and inventories - has only grown stronger, inevitably requiring much higher prices, analysts at Goldman Sachs said, in a note Tuesday.
The investment bank recommended that investors initiate a long position in the Brent Dec-24 contract, saying “the short-term path to prices is likely to remain volatile, with the USD in the (opposite) driving seat, [but] we find our conviction in the long-term bullish view only reinforced by the ongoing global supply disappointments.”
The American Petroleum Institute releases its latest estimate for U.S. crude stocks later in the session, with another modest rise expected, which would be the fifth straight weekly rise if confirmed.