Oil and natural-gas futures rose Friday, and were on track for strong weekly gains, after Tropical Storm Ida formed in the Caribbean and was on track to threaten the U.S. Gulf Coast.
Tropical Storm Ida prompted a hurricane watch for New Orleans and an emergency declaration for the state of Louisiana as it pushed across the Caribbean toward an anticipated strike on Cuba Friday.
The storm could become a “devastating hurricane” and may be on the same track as Hurricane Katrina, said Phil Flynn, senior market analyst at The Price Futures Group. Katrina caused severe damage to U.S. production and refinery capacity in the Gulf of Mexico in 2005.
Energy companies have already started moving crews off platforms in the Gulf of Mexico. A forecast from the National Hurricane Center shows the storm approaching the U.S. northern Gulf Coast on Sunday.
The storm will “slow down petroleum and natural gas exports and imports,” said Flynn. Gulf of Mexico offshore wells account for 17% of U.S. crude oil production and 5% of dry natural gas production and more than 45% of total U.S. refining capacity is along the Gulf Coast, he said.
West Texas Intermediate crude for October delivery
CL00,
CLV21,
rose $1.32, or 2%, to $68.74 a barrel on the New York Mercantile Exchange. The U.S. benchmark was on track for a more than 10% weekly advance.
October Brent crude
BRNV21,
the global benchmark, rose $1.26, or 1.7%, to $72.31 a barrel on ICE Futures Europe, with the front-month contract looking at a weekly rise of nearly 11%. The most actively traded Brent contract, November
BRN00,
BRNX21,
was up $1.22, or 1.7%, at $71.40 a barrel.
September natural gas
NGU21,
which expires at the end of the trading session, was up 14.3 cents, or 3.4%, at $4.33 per million British thermal units, with the front-month contract on track for a weekly gain of more than 12% after ending Thursday at its highest since December 2018. The most active October natural gas contract
NG00,
NGV21,
rose 14.9 cents, or 3.5%, to $4.36 per million Btus,
Production outages as a result of the tropical storm have allowed WTI, the U.S. benchmark, to narrow its discount somewhat versus Brent. The gap had risen to more than $4 a barrel during Thursday’s session, its highest since May 2020, but has narrowed back to $3.49, noted Carsten Fritsch, analyst at Commerzbank, in a note.
He noted that while “‘only’ 5% of U.S. natural gas is produced in the Gulf of Mexico…the market is tight in any case.”
Data from the Energy Information Administration released on Thursday revealed a smaller-than-expected weekly climb in U.S. natural-gas inventories, up 29 billion cubic feet to 2.851 trillion cubic feet — which is below the year-ago and five-year average levels.
Also on Nymex Friday, September gasoline
RBU21,
edged up by 0.6% to $2.27 a gallon, up more than 12% for the week, while September heating oil
HOU21,
added 1% at $2.10 a gallon, on track for an over 10% weekly gain.