Oil prices rose on Tuesday as Hurricane Idalia developed as it approached Florida’s Gulf Coast, threatening crude oil supply in an already constrained market.
By 11:44 a.m. EDT [1544 GMT], Brent crude oil prices were up 34 cents, or 0.4%, to $84.76 a barrel, while West Texas Intermediate futures were up 36 cents, or 0.5%, to $80.46 a barrel.
Idalia strengthened on Tuesday as it headed towards Florida after skirting past Cuba. The weather system is expected to slam ashore on Wednesday when it is likely to cause power outages and could hit crude production.
U.S. oil producer Chevron (CVX.N) evacuated staff from three Gulf of Mexico oil production platforms ahead of the hurricane.
Supply concerns have also been heightened by a fire at a Marathon Petroleum (MPC.N) refinery last week after a chemical leak ignited two giant storage tanks filled with naphtha.
On Monday, the company said it planned to restart units at the 596,000 barrel per day (bpd) refinery in Garyville, Louisiana, the third-largest in the United States.
U.S. crude oil inventories are expected to have dropped in the latest week, according to a preliminary Reuters poll on Monday. Crude stocks estimates from the American Petroleum Institute are due later on Tuesday, while official government figures will be posted on Wednesday.
Meanwhile, U.S. energy firms cut the number of active oil rigs for a ninth month in a row, according to industry data released on Friday, indicating that crude oil output could slowdown in the country over the coming months.
“Even with the potential for some demand destruction (from the hurricane), the coming crude oil supply squeeze is becoming more painfully obvious,” said Price Futures Group analyst Phil Flynn.
On the demand front, investors are monitoring data from major economies for further clues on interest rates this year and next. Federal Reserve Chair Jerome Powell on Friday said the U.S. central bank may need to raise interest rates further to cool stubborn inflation.
China’s post-pandemic recovery has also sputtered in the face of a worsening property sector slump, weak consumer spending and tumbling credit growth, prompting Beijing to cut policy rates.